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BP Q2 Trading statement
BP says production for the second quarter of 2005 is expected to be around 4,110 mboe per day. Production in the first quarter of the year was 4,101 mboe per day.
Excluding volumes from TNK-BP operations, production in 2Q is expected to be
3,135 mboed, compared to 3,130 mboed in 1Q’05. BP’s net share of production from TNK-BP is anticipated to be approximately 975 mboed, up slightly from the first quarter figure of 960 mboed. TNK-BP contributed 890 mboed in 2Q’04. Average production for the year as a whole is expected to be in the range within the previous estimate of 4,100- 4,200 mboed.
High oil prices will ensure better margins in both refining and marketing. The global indicator margin, a weighted average indicator based on BP’s portfolio has shown a 42% increase compared to the first quarter although the improvement in BP’s actual margins is expected to be slightly lower than suggested by the indicator margin due to the narrowing of heavy/sour crude discounts.
Heavy/sour crudes, are more expensive to refine and trade at a discount to lighter crudes. Saudi Arabia, a large producer of the heavy crude has trimmed the discount, relative to WTI, at which it sells its crude oil to refiners.
The gas, power and renewables business has been hit by a seasonal downturn in gas volumes as well as weaker margins and profits are expected to be below those achieved in the first quarter.
The growth in output last year was driven by the joint venture in Russia and barring further acquisitions no significant increase in output is expected for the rest of the year. Strong oil prices are filtering down to the company’s bottom line (hedging has slowed the impact) and the medium term outlook for prices is still good.
The share trades at 622.5p, on a prospective PE (2005 earnings) of 13.3x, within the sector range and at a small premium to Shell. The yield is 2.9%.
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