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The Wall Street Journal: BP’s Profit Declines 17% As Oil Prices, Output Fall

April 25, 2007; Page A7

LONDON — BP PLC, kicking off the oil majors’ earnings season, offered more proof that the industry’s run of record profits may be over.

The oil giant said first-quarter net profit fell 17% to $4.66 billion, as lower oil prices and a drop in output offset higher refining margins. The profit drop comes as international oil companies are finding it difficult to revive their bottom lines as they face dwindling output and rising costs.

The latest earnings were weighed down by the cost of BP’s $1.1 billion acquisition of Chevron Corp.’s Dutch manufacturing company.

The results, however, also were bolstered by a gain of $363 million, mostly related to the sale of BP’s exploration and production and gas-infrastructure business in the Netherlands and accounting gains related to North Sea contracts. The gain compares with a year-earlier charge of $17 million.

BP’s oil and gas production for the quarter totaled 3.91 million barrels of oil equivalent a day, down from 4.04 million barrels a day in the year-earlier quarter.

Take a peek at what to expect from Exxon when it reports.The average price of the Brent benchmark United Kingdom crude-oil contract was $57.80 a barrel in the quarter, down 7% on average from a year earlier, according to BP’s estimates.

Industrywide average refining margins were up 44% in northwestern Europe and 27% on the U.S. Gulf Coast, according to Citigroup Inc. BP wasn’t able to fully capture the year-to-year increase in refining margins — partly because its Texas City, Texas, refinery still is operating at 57% capacity after a deadly blast and because its refinery in Whiting, Ind., started operating at half its capacity in late March because of operational issues.

The company said profit from its exploration and production unit had been weighed down by sector-specific inflation, higher depreciation charges and increased spending to improve safety and reliability at its operations.

BP — the world’s third-largest non-government-controlled oil company by market capitalization after Exxon Mobil Corp. and Royal Dutch Shell PLC — posted net profit of $5.62 billion a year earlier. Revenue declined 3.3% to $62.04 billion from $64.17 billion.

In London, BP’s shares fell 1.6%, or nine pence, to 568.5 pence ($11.37).

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