(BP chief executive, Lord Browne: ‘There are an awful lot of players and I guess the sector will change shape’)
By Russell Hotten, Industry Editor
25 October 2006
Lord Browne, the chief executive of BP, predicted a wave of consolidation in the oil and gas industry as falling prices led companies to re-assess the finances of their exploration and development activities.
Speaking as he unveiled a small rise in the company’s third-quarter net profits, Lord Browne said oil prices would continue downward. “A lot of supply is coming on to the market. We are not suggesting a crash, but more of a moderation.”
Crude oil has been trading recently at around $60 a barrel, down from a peak of $78.40 in July.
Lord Browne said: “The high oil prices meant a lot of activity [from exploration and production companies]. A fall in prices will raises questions about investments. There are an awful lot of players and I guess the sector will change shape.” But he added: “We continue to take the view that oil prices will exceed an average of $40 per barrel over the medium term.” He would not be drawn on BP’s role in any consolidation and appeared dismissive of suggestions that the company might one day merge with Royal Dutch Shell.
The third-quarter profits, including exceptional contributions, jumped 58pc at $6.98bn (£3.7bn). This brought profits for the nine months to $18.35bn, against $14.8bn — a 24pc rise. But excluding exceptional items, these latest Q3 net profits were $4.55bn against $4.4bn last time.
The company has faced a series of problems at its Prudhoe Bay oil field in Alaska and delays to the opening of the key Thunder Horse platform in the Gulf of Mexico.
BP pumped 3.8m barrels of oil a day between July and September. This was 8,000 barrels a day less than a year ago when production was devastated by hurricanes which hit the Gulf of Mexico.
It was also 202,000 barrels below the level reached in the second quarter of this year. Lord Browne again acknowledged that the company faced several problems, but said his job now was to help correct them. “This is not about me. It’s about BP and how we put things right.”
The problems, which also include a fatal refinery explosion in Texas and allegations of market rigging, have seen its shares fall almost 20pc since April.
BP said yesterday that it was setting aside another $400m to cover compensation claims related to the 2005 blast, pushing the total bill, including repairs and lost profits to around $2bn.
In a research note yesterday, analysts at Citigroup said: “This was always going to be a difficult quarter for BP. We believe the operational and reputational recovery will take time for BP.”
Despite reports that the Russian government is putting pressure on Western energy companies, such as Shell, in order to get a larger slice of oil and gas revenues, Lord Browne insisted that BP was not affected by any such action.
The quarterly dividend is 5.2p, against 5p last year, bringing the increase over the past nine months to 8pc.