The Times: Investors punish BP after poor production

January 10, 2007
Carl Mortished, International Business Editor
 
The stock market punished BP yesterday, slicing £3 billion off the value of the company as investors shied away from poor oil production figures and a falling crude oil price.
Hopes that BP would spring back from its summer troubles at Prudhoe Bay in Alaska have been dashed and the oil group produced 5 per cent less oil in the last quarter than it did in the final three months of 2005. 
 
BP produced an average of 3.82 million barrels per day (bpd) of oil and gas in the fourth quarter and will not meet its production target of 4.1 million to 4.2 million bpd for the year. The fourth-quarter slippage implies a full-year average output of 3.925 million bpd for 2006 and yesterday City analysts were trimming their expectations of recovery in 2007.

BP shares fell more than 3 per cent to 535p yesterday, widening the gap between Britain’s largest company and its closest rival, Royal Dutch Shell. BP is now worth £104 billion, against Shell’s £110 billion Further slippage yesterday in the price of crude oil — the Nymex futures price dipped below $54 per barrel — added to the pressure on BP and other oil shares, but concern is mounting in the City that the management turmoil at BP’s head office is now beginning to affect operational performance.

Citigroup, the investment bank, cut its earnings and production estimates for BP, citing worse than expected operational and financial data. The figures suggested that “issues of the last several months have diverted management’s attention away from day-to-day operations”.

Industrial accidents, including a fatal explosion at a plant in Texas and a corrosion problem that caused a temporary shutdown of Prudhoe Bay, have preoccupied BP’s top management. Also, internal conflict has arisen over efforts by Lord Browne of Madingley, the chief executive, to delay his retirement.

Jon Rigby, oil analyst for UBS, said that BP needed to show that it is operationally sound. He said: “This quarter is disappointing, the third quarter was disappointing and the fourth quarter in 2005 was disappointing. It’s not good.” He doubted that management issues at the top were affecting nuts-and-bolts operations.

BP’s refining margins were below most forecasts, with a global margin of $6.30 a barrel, below the 2005 fourth quarter’s $7.60 and a sharp drop from the third quarter’s $8.40.
 
http://business.timesonline.co.uk/article/0,,9072-2539361,00.html

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