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Financial Times: Cazenove cuts forecast on BP’s third quarter

By Ed Crooks
Published: October 4 2007 03:00 | Last updated: October 4 2007 03:00

JPMorgan Cazenove, a company broker to BP, has cut its forecast of the oil group’s third-quarter profits, suggesting that the consensus of analysts’ estimates is about 30 per cent too high.

In a note, Fred Lucas of Cazenove said the broker was cutting its forecast of third-quarter net income by 9 per cent to $3.915bn. It predicted earnings per share of 10.1p for the quarter, compared with a consensus forecast of 13.2p.

The move comes after a report in the Financial Times that Tony Hayward, BP’s chief executive, had told staff in an internal meeting that revenues in the third quarter had been “dreadful”.

The company said later he had been referring to operational performance, although that would inevitably have financial consequences.

BP’s shares fell 2½p to 557p yesterday. A number of other big oil companies have also been falling: Royal Dutch Shell lost almost 3 per cent on Tuesday, and yesterday closed down a further 25p at £19.55.

Although BP and other oil companies have been benefiting from a high oil price – it hit new records above $80 a barrel during the quarter – other market movements have been less favourable.

The US natural gas price, for example, has dropped and there has been a slump in refining margins.

On top of the market movements, BP has suffered from reduced capacity at three of its five US refineries, with delays to start-ups of important projects.

One piece of good news for the company this week was the start of production at Greater Plutonio in Angola on Tuesday, coinciding conveniently with the start of the fourth quarter of the year.

As production from that and other projects such as Atlantis in the Gulf of Mexico come on stream, and the refineries get back to full operation, BP’s revenues are expected to improve.

Cazenove’s note predicted 12 per cent earnings per share growth in 2008 compared with 2007.

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