BP profits slump amid company woes

LONDON, England (AP) -- BP PLC reported a 29 percent slump in third-quarter profits Tuesday due to higher maintenance costs and outages at key refineries, but some analysts said the worst might be over after a run of operational problems at Europe's second-largest oil company.

The company posted net profit of $4.4 billion for the three months ending Sept. 30, down from $6.2 billion over the same period of 2006. Revenue rose 2.7 percent to $72.6 billion.

Like most other oil and gas companies, BP faced lower refining margins and gas prices in the quarter, but its exposure to those reduced margins was magnified by operational troubles that included temporary shutdowns at its Whiting, Ind., and Texas City refineries.

It is also still dealing with fallout from an Alaskan oil spill and a fatal 2005 blast at the Texas refinery, which resulted in ongoing higher maintenance costs.

Quarterly replacement cost profit -- which excludes changes in the value of crude inventories, measuring the amount it would cost to replace assets at current prices -- fell 45 percent to $3.87 billion, compared with $6.98 billion in the same period last year.

Viewed by many analysts as the best measure of an oil company's underlying performance, the figure was the lowest since the fourth quarter of 2004, despite a 70 percent rise in oil prices in the two years since.

However, the profit decline was well flagged by new Chief Executive Tony Hayward, muting the effect on the company's share price. Investors appeared hopeful that BP is in the early stages of a turnaround following the departure of former CEO John Browne.

Hayward, who succeeded Browne on May 1, acknowledged earlier this month that BP had lagged behind its peers over the last few years because of poor management and launched a comprehensive structural change -- cutting the number of business units and stripping out management layers.

Charles Stanley analyst Tony Shepard said the third-quarter results were in line with low market expectations for BP "and from here its operational performance should begin to improve.

"Hopefully, today's Q3 results will mark a low point for the group," he added.

Hargreaves Lansdown analyst Richard Hunter said the outlook for the remainder of the year was promising.

"The recent oil price highs should underpin performance, along with the resumption of projects such as the Gulf of Mexico, Thunder Horse and, in the foreseeable future, the Texas refinery, which should return to full capacity," he said. "The challenges may not be over but at least the rot seems to have been stopped."

BP said that refining throughputs were 2.15 billion barrels a day for the quarter, compared to 2.29 billion barrels a day in the same period a year ago.

The company said the drop was mainly due to the sale of the Coryton refinery in England in May and lower availability of its Whiting refinery, which was hit by a fire in March.

The 437,000 barrels-a-day Texas City refinery has also been producing at just over half its capacity, eating into the company's profits.

BP said it expected Whiting and Texas City to be working at full capacity in the first half of next year.

The company's average quarterly global refining margins fell 4.2 percent over the quarter to $8.05 a barrel, continuing a two-year decline as relatively benign hurricane seasons in the U.S. Gulf contrasted with serious disruptions from hurricanes witnessed in 2005 that helped spur margins higher.

BP shares rose 1.9 percent to 616.5 pence ($12.59) on the London Stock Exchange. E-mail to a friend

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