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BP: trading statement
BP, Europe’s largest oil company said the hurricane season affected production volumes in the fourth quarter ending December 2005. Overall BP production in Q4 is expected to be around 4,010 mboe per day compared to 4,090 mboe per day in the same period last year. Excluding volumes from TNK-BP operations (in Russia), production in Q4 is expected to be around 2,990 mboed compared to 3,125 mboe in the same period last year.
Volumes in the fourth quarter are higher than the 3,824mboe achieved in Q3, reflecting growth in the new profit centres and the completion of the planned maintenance season (primarily in the North Sea). BP began pumping oil from the Caspian Sea late last month, part of the company’s strategy in diversifying its production base.
The hurricane season is estimated to have reduced daily production by around 160 mboed in 4Q compared to 135 mboed in Q3.
Prices in the fourth quarter were also weaker for most liquids although gas prices were firm. Refining margins also declined although lower wholesale product prices resulted in a recovery in marketing margins during the fourth quarter relative to Q3. Margins from the Gas Power & Renewables business are expected to be higher than Q3, as a result of strong gas marketing margins and a seasonal upsurge in demand.
BP’s share price has weakened over concerns with weaker oil prices and the impact of the hurricane season. The medium term outlook for the oil and gas industry is still unchanged and we view the weaker quarter as a temporary setback.
The share trades at 638p, on a prospective PE (2006 earnings) of 10.5x, within the sector range with a yield of 3.3%.
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