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Financial Times: BP earnings rise 23% as week of good news begins

Financial Times: BP earnings rise 23% as week of good news begins

“Shell was especially hit this year by the scandal that revealed it had wrongly booked more than 20 per cent of its reserves”

By Carola Hoyos, Energy Correspondent

Jul 28, 2004

BP, the UK-based energy group, yesterday foreshadowed a week of impressive earnings announcements from the world’s biggest international oil companies.

The UK-led group reported second quarter pro-forma net income of $3.91bn (£2.14bn), up 23 per cent from a year ago. It will be followed by earnings announcements from the UK’s BG today, Royal Dutch/Shell, the Anglo-Dutch group, and ExxonMobil of the US tomorrow. ChevronTexaco of the US reports on Friday, and France’s Total will reveal its results next week.

Although BP’s results came in just below analysts’ forecasts and its shares slipped slightly, the performance was still described as strong by most analysts.

Together Exxon, BP, Shell, Total and Chevron – the world’s five largest listed energy companies by market capitalisation – are expected to have made nearly $17bn in the past three months.

Higher oil prices have been the most important reason for the companies’ success. North Sea Brent crude, the European oil price benchmark, averaged $35.32 a barrel from April to June, the highest of any quarter for more than 20 years, said Lord Browne, BP’s chief executive.

Benchmark US oil prices yesterday hit a near-record $42.22 a barrel on the New York Mercantile Exchange, before closing slightly lower at $41.84. The price was driven higher by unprecedented demand, fear of supply disruptions and a policy by the Organisation of Petroleum Exporting Countries to pump just enough to meet demand.

Meanwhile, for BP, stronger refining margins led to refining and marketing operating income of $1.56bn, up from $1.09bn a year ago. Total revenue was $71.15bn, up 30 per cent.

But the bumper numbers could not hide the production decline. BP reported production growth of 18 per cent over the past year, much of it from its new partnership with Russia’s TNK and its acquisition of Slavneft. Excluding Russia, production fell 7 per cent from last year, though excluding asset sales and operational downtime the drop was 2 per cent.

The struggle to increase production has been reflected in oil companies’ share performance. Shell was especially hit this year by the scandal that revealed it had wrongly booked more than 20 per cent of its reserves with the US Securities and Exchange Commission. Nonetheless, Lord Browne said now “was the turn of the shareholder” as he introduced a second quarter dividend of 7.1 cents, up 9.2 per cent.

© Copyright The Financial Times Ltd

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