BP counts the cost of Katrina
citywire.co.uk
By: Douglas Bence, Companies Correspondent
Published: 11:31 Tuesday 04 October 2005
Hurricanes Katrina and Rita cost oil giant BP an estimated £398 million and so damaged production in the area that the annual total will miss the target and fall for the first time in two years.
As well as damaging oil and gas operations in the Gulf of Mexico, production at the world’s second largest petroleum company was hit at its Texas City refinery and in addition there is the cost of repairing the damage and cleaning up the mess.
BP (BPA) said on 31 August that seven platforms had been damaged in the Gulf of Mexico by Katrina, so today's trading news came as no surprise. But it was made worse by Rita, which three weeks later forced other rigs to be evacuated.
Around 14 refineries with a combined capacity of more than 3.3 million barrels a day were either closed or operated with reduced production in Corpus Christi, Port Arthur and Houston. BP lost an average of 145,000 barrels of oil a day spread over the quarter.
It is not yet possible to give precise costs, but the bills for repairing the $1 billion Thunder Horse platform in the Gulf, damaged in July’s Hurricane Dennis, totalled $100 million.
Figures have yet to come from Shell and Exxon Mobil, but 8.2% of the region’s total production has been lost, better than expected as originally 20% of US refining capacity was shut down in Texas on 19 September.
The shares were hit hard initially, bottoming at 661p and as BP is such a large component in the FTSE 100 wiped eight points from the index. They later recovered to 665.25p, down 8.25p
With a million barrels of oil a day from its Russian interests, total production for the third quarter was 3.8 million barrels of oil equivalent a day, 2.8% down on the equivalent 2004 quarter’s 3.91 million barrels.
Production for the year should still be between 4.1-4.2 million barrels a day as forecast by BP in February. Prices per barrel of Brent crude were $61.63 in the third quarter against $41.54 for the same three months in 2004, said BP. There was a $10 dollar a barrel increase between the second and third quarters.
Third quarter marketing and retail margins were down significantly on the second quarter with the overall marketing result expected to be negative. This was due to the sharp rise in wholesale product prices, which squeezed marketing margins, said the trading statement.
BP emphasised that the estimates regarding revenue and trading conditions for the third quarter are provisional. Although the figures relating to margins, price, realisation, costs and production are expected to be included in the figures, some of them are based on data that only arose in the first month of the quarter.
During the quarter BP spent $3.7 billion buying back 327 million shares. The fourth quarter dividend will be announced on 25 October with the third quarter figures.
Citywire verdict:
Don’t worry. Dramatic and appalling as Katrina was, the Gulf is still only part of BP’s operations and its production facilities have amazingly fast powers of recovery. The shares have been climbing with the market since April and should stay that way. |
