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BP: Q3 results
Oil giant BP said its third quarter replacement cost profit was $4,410m, a 16% increase over the same period last year. The results for the quarter were affected by hurricanes Katrina and Rita as well as loss on re-measurement to fair value of Innovene following the recent announcement of its divestment.
Innovene is BP’s olefins, derivatives and refining group. The re-measurement to fair value (of Innovene’s assets) resulted in a loss of $724m before tax.
BP has charged $100m for impairment in respect of a field in the Gulf of Mexico Shelf hit by hurricanes but this is still provisional as hurricane damage is still being assessed.
Excluding these items, BP’s performance has been good, the company benefiting from stronger trading conditions.
Exploration and Production’s third quarter result was up 36% over last year due to higher realisations, partially offset by slightly lower volumes and higher operating costs.
The Refining and Marketing result were 40% ahead of the same period last year ($1,858m against $1,318m) due to record refining margins partially offset by significantly lower retail marketing margins.
In Gas, Power and Renewables the result increased dramatically (to $314m from $30m) due to higher contributions from the gas marketing business.
Prospects in the medium term still look sound but in the short term BP’s production could be affected by further storms in the Gulf of Mexico. The full extent of the hurricane impact is yet to be known and may be a drag on 4Q earnings.
The share trades at 607.5p, on a prospective PE (2005 earnings) of 10.3x in the middle of the sector range (considerably lower than the multiple of 12x where it has traded for much of the last year) with a yield of 3%.
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