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Financial Times: Investors in BP let down by quarterly earnings

By Toby Shelley
Published: February 8 2006 02:00
BP yesterday disappointed investors despite producing record annual profit and announcing plans to return up to $65bn (£37m) to shareholders over the next three years.
BP reported a net profit of $22.34bn for 2005, up from $17.1bn the year before.
But weaker-than-expected earnings for the fourth quarter forced the group's shares down 2.7 per cent, or 18p, to 647½p.
BP said its fourth-quarter replacement cost profit, which excludes changes in inventory values, was $4.43bn.
The company replaced 95 per cent of the reserves that it used up last year and has 18bn barrels of proved reserves and 41bn barrels of more speculative resources to build on.
Though the reserves replacement number was a disappointment, it outshone Shell, which is still struggling after its big cut in proved reserves two years ago. BP's dividend for the quarter will be 9.375 cents a share, a rise of 21 per cent.
The record profit and big returns to shareholders brought calls for higher taxation for oil majors.
Tony Woodley, general secretary of the Transport and General Workers Union, said the profit could be used to boost a scheme to help workers who lost pensions when their employers went out of business.
Lord Browne, chief executive, said BP expected to produce about 4.1m to 4.2m barrels of oil equivalent a day in 2006. The company should increase output by about 4 per cent a year to 2010, he said, a little slower than the 4.4 per cent achieved since 2000.
Last year's increase, however, was well under 0.5 per cent due to the impact of US Gulf hurricanes.
For the fourth quarter, production dropped 2 per cent year on year.
The storms also hit BP's refining results. Last month, BP was unable to specify when the Texas City refinery would be back onstream.
Now the company said it will be back up this quarter, having cost $600m to $800m in lost profit. Estimated fourth-quarter opportunity losses due to the hurricanes were confirmed at $950m.
Capital spending for 2006 will be $15bn, $11bn of it upstream. Expenditure for the TNK-BP joint venture in Russia, which has furnished much of BP's production growth, will rise sharply from $1.8bn to $2.5bn.
The dominant exploration and production division saw operating profit soar 38 per cent to almost $6.6bn for the quarter as the higher prices more than made up for the production slippage and fair value losses of more than $800m on North Sea gas contracts that failed to capture the rise in prices.

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