The Guardian: Russia helps BP to 17% rise in production

The Guardian: Russia helps BP to 17% rise in production: “in contrast to some of the recent missives from Shell”

Richard Wray

Saturday July 3, 2004

BP showed how its expansion into Russia has paid off yesterday by reporting a 17% rise in production over the past three months almost entirely due to the performance of its assets in the former Soviet Union.

The oil company said production over the second quarter will add up to the equivalent of about 3.95m barrels of oil a day, 17% up on the same period last year but down slightly from the 4m in the first three months of 2004.

Cutting out the impact of the company’s recently acquired Russian activities, however, would have left production at 3.06m barrels, down from the 3.253m produced in the second quarter last year.

BP’s Russian joint venture, TNK-BP, is expected to produce 1.5m barrels of oil equivalents a day this year, giving BP 750,000 barrels or about 20% of the company’s total global output.

Highlighting the impact of the crisis in the Middle East, BP said the price of oil averaged $35.32 a barrel during the second quarter, up almost a third on the $26.03 in the same period of 2003.

Despite the rising oil price, BP also warned yesterday that margins in its retail business were under pressure because of rising production costs.

Margins in its refining operations reached new highs during the three months to the end of June with volumes also picking up. The company added that overall refining margins are likely to be significantly below the industry average because of its marketing activities in several territories including Germany and Austria. The overall increased cost of energy will have a knock-on effect on refining margins.

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While analysts said the trading statement from BP was broadly in line with what they had expected – in contrast to some of the recent missives from Shell – the stock ended the day up 4p at 481p.

The shares were also buoyed by BP’s announcement that it would continue to buy back shares even during its closed period, which started on Thursday.

The company has agreed to buy $33bn (£18bn) of stock if the oil price stays above $30 over the next three years. During the second quarter of the year the business bought back 225m shares for a total of $2bn.

Separately, shares in Russian oil company Yukos dropped yesterday when it gave a warning that it might have to cut production next week after its bank accounts were frozen and a new tax bill threatened to drive it into bankruptcy.

Reports in Russia said the authorities presented the company with a bill for tax arrears for 2001 which doubled demands against the company to almost $7bn. It has just over $1bn in the bank.

http://www.guardian.co.uk/business/story/0,3604,1253090,00.html

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