BP's 17 percent drop in its first-quarter profit was the first and probably the steepest decline among a string of lower results expected from most of the world's largest oil companies, analysts said Tuesday.
Those include the March 2005 explosion at its Texas City refinery, which killed 15 people and injured scores more; last year's temporary shutdown of an Alaskan pipeline because of corrosion; and delays in getting two key Gulf of Mexico oil platforms online.
''This clearly has impacted our performance," Grote said. ''Nonetheless, we've come a long way, and the lessons we've learned are being embedded across the group."
BP's net income for the quarter was $4.66 billion compared to $5.62 billion in the first quarter of 2006. Revenue fell 3 percent to $62 billion from $64.2 billion.
Production fell to 3.91 million barrels of oil equivalent per day, compared to 4.04 million a year ago. Investors yawned. BP shares closed down 98 cents, less than 2 percent, at $67.76 Wednesday on the New York Stock Exchange.
Analysts surveyed by Thomson Financial anticipate narrower declines in year-over-year quarterly results from Houston-based ConocoPhillips and Marathon Oil Corp., San Ramon, Calif.-based Chevron Corp. and The Hague-based Royal Dutch Shell. The same survey expects Irving-based Exxon Mobil Corp. to report a modest gain. ConocoPhillips is scheduled to announce results today, with the others following in the coming days.
Robert Kessler, an analyst with Simmons & Company International in Houston, predicted that BP's results will be the "extreme low case" of those reporting declines.
But he noted that although BP's production fell in comparison to 2006's first quarter, it rose from 3.8 million barrels a day in the fourth quarter of last year.
"A little bit of a pickup is welcome," he said.
Grote noted operational issues with BP's refineries in Texas City and Whiting, Ind., are concerns as well. Citigroup said Tuesday that refining margins were up nearly 30 percent in the United States. But BP's Texas City refinery couldn't reap that bounty because it is operating at 57 percent capacity in light of continued efforts to recover from the blast.
The Whiting refinery is operating at half its 400,000-barrel-a-day capacity after a March fire and a power outage earlier this month, costing the company about $100 million a month, Grote said.
He declined to speculate on when the Whiting refinery would be repaired, but said the Texas City refinery remains on track to operate at full capacity by year's end. Citigroup analyst James Neale said in a note to investors that BP's refining and marketing income was down 19 percent year-over-year with the refining issues.
"With no extensive outlook statement, the market is left to wonder about operational recovery," Neale wrote.
Grote told analysts BP is incorporating recommendations from a panel chaired by former Secretary of State James A. Baker III that criticized the company for safety lapses at its U.S. refineries. Those recommendations include appointment of an independent monitor. The panel examined BP's safety practices in light of the deadly 2005 explosion.
Regarding the Gulf platforms, Grote said Thunder Horse, originally slated to start pumping up to 250,000 barrels a day in 2005, remains slated to go on line next year. The platform, which will be the biggest in the Gulf, has faced delays because of equipment and operational problems.
A second platform, Atlantis, which will be the second-largest in the Gulf with production capacity of 200,000 barrels a day, remains scheduled to start operating by the end of the year instead of this summer, Grote said.
He noted the delays allowed drilling of more production wells, so the ramp-up may be faster once the two platforms start operating. Jason Kenney, an analyst with ING Wholesale Banking in Edinburgh, Scotland, said that with an imminent changeover in CEOs, BP is likely to continue its focus on improving operational credibility for the next year or more.
John Browne is scheduled to step down as CEO in July — a year and a half earlier than originally planned — and current exploration and production division head Tony Hayward will succeed him.
Neither Browne nor Hayward participated in the conference call with analysts, but BP spokesman Robert Wine said it wasn't unusual for Grote and investor relations chief Fergus MacLeod to go it alone.
In February, Browne said production over the next several years would be flat rather than growing annually by 4 percent as previously projected, prompting analysts to speculate that he was trying to lower expectations to ease Hayward's transition. Kenney said that assumption still stands.
''His aim is to basically come in as a safe pair of hands with all the decks cleared," Kenney said of Hayward.
Once the company restores capital efficiency and credibility in its operations, BP can move forward, Kenney said.
BajaeNergyBLOG
OiL,Baja
eNergy
BLOG
