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The New York Times: Profit Declines Sharply at BP

Published: October 24, 2007

LONDON, Oct. 23 — BP, the British oil company, said today that its third-quarter net income fell 29 percent from the period a year earlier as lower refining margins and gas prices were exacerbated by disruptions at some refineries.

Net profit fell to $4.41 billion, or 23 cents a share, in the quarter from $6.23 billion, or 31 cents a share, a year earlier, but it still beat analysts expectations, which were softened when the new chief executive, Tony Hayward, in a document leaked in September said that operational performance in the third quarter was “dreadful.”

BP said that refineries in Texas City, Tex., and Whiting, Ind., two of its largest in the United States, were expected to return to full capacity in the first half of 2008, which should help revive profit growth. The company, which largely depends on new projects to catch up with the output growth of its rivals, also said that pumping has started at new fields in Angola and in the Gulf of Mexico. Revenue increased 4.1 percent, to $71.3 billion.

“While this was a weak quarter, we expect the market to look ahead to a much improved 2008,” Colin Smith, an analyst at Dresdner Kleinwort in London wrote in a note to investors.

BP shares rose 1.2 percent, to £6.12 in London showing that some investors expect Mr. Hayward’s plans to help the company overcome its problems.

Some analysts said they expected other oil companies to also report lower third-quarter earnings because of lower production volumes and squeezed refining margins. Royal Dutch Shell is scheduled to report earnings on Thursday, and Exxon Mobil on Nov. 1.

Mr. Hayward, who took over from John Browne in May, is aiming to improve shareholder confidence and profit growth at BP, which has suffered a series of accidents in recent years and investigators have blamed for sustaining a culture that favored cost-cutting over safety. An explosion at the Texas City refinery two years ago killed 15 workers and injured hundreds more. It was followed by an oil spill in Alaska that forced the shutdown of the pipeline.

Mr. Hayward has pledged “to fix” the company’s operational performance and called for a “fundamental shift” at BP. Earlier this month, he said he planned to reduce the work force at BP’s headquarters by 25 percent, break up its gas, power and renewable-energy unit, and simplify a management structure that had grown too complex after about $100 billion of acquisitions.

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