BP indicates robust first-quarter profits
<a href=news.ft.com>URL By Carola Hoyos in London Published: April 2 2003 12:04 | Last Updated: April 2 2003 12:04
BP on Wednesday outlined significantly improved refining margins for the first quarter of this year, foreshadowing a profitable quarter for the sector.
In another step away from using production volume as target measurement, the UK-based company, in its quarterly trading statement did not reveal its production levels, as it had done in past updates.
BP's global refining margin improved to $4.52 a barrel, up 64 per cent from the last quarter of 2002 and 176 per cent from a year ago.
Refining margins in the US have been stronger than those in north-west Europe and Singapore, a boost to BP in particular because of the company's relatively wide exposure there.
BP earned $6.77 for every barrel of oil it refined on the US West Coast and $6.14 on the Gulf Coast in the first quarter of this year, which ended on March 31. Refining margins in the Midwest were weaker at $4.14 a barrel, slightly disappointing for BP, whose refineries process 500,000-600,000 barrels a day in Indiana and Ohio, analysts said.
The improvements were largely due to the increase in world oil prices because of a combination of export interruptions in Venezuela, Nigeria and Iraq at a time of historically low commercial reserve stocks, especially in the US.
Jon Rigby, analyst at Commerzbank, said: "It's positive for BP, positive for the sector, but there are a couple of little points that take off some of the gloss."
The disappointments were the reduced margins in BP's chemical business. The company said it expected its chemical margins in the first quarter of this year to be "sharply lower" than the fourth quarter of last year, because of the rising cost of oil, gas and other feedstocks used.
Mr Rigby also pointed out that BP was not fully able to benefit from the increased gas prices in the US because of its exposure in local markets, where prices did not improve as much as the main Henry Hub marker price. BP expects only to realise $2/mcf improvement of the natural gas price, which at Henry Hub is expected to increase by 2.54/mcf. Nevertheless, that realisation would be more in line with marker prices than BP's results at the end of last year.
BP put the price of West Texas Intermediate, the US benchmark crude, at $34.00 a barrel, up $5.69 from the last quarter of 2002, while Brent, the European benchmark crude, was pegged at $31.47 a barrel, up $4.59. Natural gas benchmark prices in the US were $6.53 per mmbtu (million British thermal units), up from $3.99 at the end of last year, while UK prices were 21.28 p/therm, up from 19.09p.
In late morning trade the shares were down 1.1 per cent at 410-3/4p.