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BP: 1Q Trading statement
BP reported that production in the first quarter of 2005 is expected to be around 4,090 mboed, similar to the fourth quarter of last year. BP’s average production for 2005 as a whole is expected to be in the range 4,100 - 4,200 mboed a small increase from 3,997 mboed achieved last year.
Average realisations have improved by around 8% for crude oil compared to the fourth quarter of last year, but gas prices have declined by around 10%.
The first quarter’s average refining Global Indicator Margin (the weighted average refining margin on BP’s portfolio) was slightly above that in the previous quarter, and higher than a year earlier. Actual refining margins are expected to be below those in the fourth quarter of 2004, due to higher scheduled maintenance/revamping of refineries (referred to as ‘turnarounds’) and adverse currency movements.
Marketing margins have decreased in the first quarter relative to the previous quarter and were also below those of a year ago due to rising oil prices. Both NGL (natural gas liquids) and gas marketing margins are expected to be lower than those seen in the fourth quarter of last year, and similar to the level of the first quarter of 2004.
BP will report Non-operating gains of around $1 bn before tax, including $1.1bn of disposal gains, mainly related to the sale of BP’s interest in Ormen Lange and the Interconnector pipeline.
The total consolidated interest charge is expected to be around $60m higher than in the fourth quarter last year due to higher interest rates and termination charges on financing leases.
On the whole there was more good news than bad news; higher levels of output and better realisations on the core products. The bad news was confined to gas (which forms only a small part of BP’s business) and declining margins in marketing are not a concern-they will be more than made up by better margins in exploration and production.
BP trades at 558p, on a prospective PE of 13.3x with a yield of 3%
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