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London Evening Standard: BP shares go diving as its production woes bite

By: Robert Lea, Evening Standard – London: KRTBN
Published: Jan 09, 2007

Shares in beleaguered BP plunged further today after the oil giant admitted it has missed by a mile its 2006 production targets and profit margins are falling too.

Analysts immediately slashed their forecasts. Morgan Stanley, which said the news indicated BP’s worst trading quarter since the start of 2004, is cutting its 2006 fourth-quarter earnings estimates by 14 percent, or $600 million (GBP309 million), to $3.7 billion.

“The Q4 trading statement is very weak,” said analyst Neil Perry.

The trading update sent BP shares down 14 1/2p to 538p, extending its plunge over the past eight months to nearly 25 percent. In this time, more than GBP35 billion has been wiped off its value and it has lost its crown as Britain’s largest company to arch-rival Shell.

BP said it produced an average of 3.82 million barrels of oil a day in the last three months of 2006.

That marks a 5 percent year-on-year fall in production, undershoots City analysts’ production forecasts, who were expecting up to four million barrels a day, and ensures the company badly misses its original 2006 estimates of between 4.1 million and 4.2 million barrels a day.

BP further admitted profit margins from its refineries are plunging, down 17 percent year on year at $6.30 a barrel, below analysts’ estimates of $6.90.

The statement ahead of full-year results next month caps a terrible year for BP, which is still being weighed down by the question of when Lord Browne will stand down as chief executive and who will get the job.

News that its $4.5 billion Shah Deniz gasfield in the Caspian Sea off Azerbaijan was shut down last month after just two days in operation is the latest in a string of operating reversals for the company.

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