BP Profit Hit by Hurricanes
Oil giant BP said Tuesday that damage caused by hurricanes Katrina and Rita cut third-quarter profit by more than $700 million and led to the first quarterly drop in oil and gas production in two years.
Third-quarter output was about 3.8 million barrels of oil equivalent a day, 2.8% less than the 3.91 million reported in the year-earlier period, and full-year production could decline by as much as 3.2%, London-based BP said.
BP is one of the first major oil companies to detail costs arising from the storms. Katrina and Rita have so far halted production of 8.2% of the region’s total annual output, damaging facilities owned by Royal Dutch Shell, Exxon Mobil Corp. and Chevron Corp., among others.
“Investors shouldn’t underestimate the level of damage that’s been done,” said Bertie Thomson, a fund manager at Aberdeen Asset Management in London.
Returning offshore natural gas production to normal levels probably will take months and repair costs “clearly will be in the billions of dollars,” Interior Secretary Gale Norton said Tuesday.
Noting that a year ago gulf oil and gas producers recovered fairly quickly from Hurricane Ivan, Norton said at a news conference, “We are not seeing this kind of quick recovery this time around.” About 10% of gulf offshore oil production and 28% of the gas production has been brought back into operation, the Interior Department said.
BP, the world’s second-largest publicly traded oil company, lowered its full-year average production target by 130,000 barrels a day because of storm damage, spokesman Toby Odone said. Previously, BP said average output this year would be 4.1 million to 4.2 million barrels a day.
The $700-million loss is equivalent to less than 1% of BP’s second-quarter revenue. Third-quarter results will be reported Oct. 25.
Goldman, Sachs & Co. reacted by slashing its full-year net income estimate for BP by $1.7 billion, or 6.6%. BP’s full-year profit will be $23.56 billion, down from an earlier estimate of $25.22 billion, Goldman’s Matthew Lanstone, a London-based analyst, said in a report.
Even so, the hurricane “has fortuitously made a great deal of money for them” by boosting oil prices and refining profit, said Roger Nightingale, global strategist at Millennium Global Investments in London.
Costs to repair BP’s Thunder Horse platform in the Gulf of Mexico, harmed in an earlier storm, were an extra $100 million in the period, BP said.
Katrina and Rita cut oil and natural-gas production from the gulf, curbed output from BP’s Texas City, Texas, refinery and reduced marketing profit margins because of the surge in wholesale prices, BP said.
BP’s shares fell $1.80, or 2.6%, to $68.80 in New York trading. Most oil stocks declined Tuesday, as did oil futures; light, sweet crude for November delivery dropped $1.57 to settle at $63.90 a barrel on the New York Mercantile Exchange.
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Bloomberg News and Associated Press were used in compiling this report.
