Lord Browne of Madingley, chief executive of BP, yesterday forecast that the price of oil would stay above $40 a barrel for the rest of the year, as he unveiled a 29pc hike in first quarter profits to a record $5.5billion (£2.87billion).Oil to stay over $40, says Browne
By Christopher Hope (Filed: 27/04/2005)
The forecast means BP's shareholders will benefit from a step-up in BP's share buyback programme, which is pegged to the oil price. Shares in the world's second biggest oil and gas company yesterday closed up 4 at 543p.
BP announced record first quarter profits of £2.87 billion
BP's robust outlook confounded analysts who have suggested oil prices peaked last year. During the quarter, oil prices averaged at nearly $47.62 a barrel, $3.77 higher than in the fourth quarter last year.
Lord Browne added that prices "look set to remain supported at above $40 per barrel for the rest of the year on the back of world oil consumption growth and limited spare production capacity.
"Our outlook remains unchanged... namely that oil prices are likely to have a support level of around $30 a barrel for at least the medium term. They may well average at a higher level than the support level."
BP's share buyback and dividend programme is linked to the price of oil: the super-major pledged in March 2004 to hand back $33billion to shareholders if the price averaged over $30 a barrel in the three years to March 2007. In the first quarter, it bought back 193m of its own shares, worth $2billion.
The strong oil price, combined with strong refining margins and a $535m gain on BP's sale of its stake in the Ormen Lange field in Norway, helped BP's replacement cost profit jump from $3.5billion to $5.5billion, on total revenues up 2pc to $79 billion in the first three months of 2005.
Lord Browne said BP remained confident about doing business in Russia, despite its joint venture TNK-BP facing a large tax bill there. He admitted that some of the stories in the press were alarming. "If you stepped back from that you would say 'how on earth would anyone do business in Russia'."
But TNK-BP had been a good deal for BP. He was relaxed about Russia's aggressive pursuit of back taxes, asserting BP was not liable for any back taxes which pre-date the joint venture. Lord Browne said that he had been "very reassured" following a meeting with President Putin last week, adding: "I feel reassured that TNK-BP will not be positively discriminated against."
Production was flat at 4.1m barrels a day. Lord Browne said the high oil price would not start to benefit production levels for five to seven years because of the length of time it takes to develop fields. |
