``Repairs are ongoing and we expect to resume sour crude processing in the fourth quarter of 2007 and to restore the refinery to its full flexibility and crude capacity in the first half of 2008,'' BP said today in a statement.
BP has lost output at the Whiting refinery, the largest in the Midwest, and at its plant in Texas City, Texas. At full strength, they can handle a combined 880,000 barrels of oil a day, more than the daily production of Qatar.
The ``very cautious'' outlook on the return to full capacity of the Whiting refinery is ``disappointing,'' Richard Griffith, an analyst at Evolution Securities, said today by phone from London. ``It does reflect BP's experience with the Texas City refinery,'' Griffith said. He has an ``add' rating on the stock.
The Texas refinery is expected to process about 400,000 barrels a day by the end of this year, BP said in a presentation following the release of second-quarter results today.
by Fred Pals
BP Second-Quarter Net Income Rises on Refinery Sale
BP Plc, Europe's second-largest oil company, reported better-than-expected earnings in the second quarter, boosted by record gasoline prices and the sale of a U.K. refinery.
Net income rose 1.5 percent to $7.38 billion, or 38 cents a share, from $7.27 billion, or 36 cents, in the year-earlier period, the London-based company said today. Profit excluding one-time items and inventory changes beat estimates for the first time in a year.
Chief Executive Officer Tony Hayward, who replaced John Browne on May 1, surmounted refinery disruptions at plants in Texas and Indiana to earn more from processing crude into fuels. BP is counting on new output at the Rosa field in Angola and plans to start the Atlantis platform in the Gulf of Mexico to help counter declining oil and gas production.
``The turnaround is on the horizon,'' Jason Kenney, an analyst at ING Wholesale Banking in Edinburgh, said by phone. ``The results are slightly ahead of expectations'' because a recovery in refinery operations and expected production growth ``means a steady stream of revenue,'' he said.
Shares of BP have risen 5 percent so far this year, underperforming a 12 percent gain at larger rival Royal Dutch Shell Plc, which reports earnings July 26. BP stock was down 0.8 percent at 596.5 pence as of 12:40 p.m. in London.
The net income result included a gain of $741 million, mostly attributable to a $1 billion gain from the disposal of BP's Coryton refinery. Swiss-based Petroplus Holdings AG said June 1 it paid $1.6 billion for the refinery and other assets.
Profit excluding one-time items and gains or losses from holding inventories fell 12 percent to $5.35 billion. That beat the $5.06 billion median estimate from eight analysts surveyed by Bloomberg. BP last beat analyst consensus forecasts in the second quarter of 2006.
Hayward told a press conference he's ``determined to fix'' BP's operational performance. He plans to simplify BP's organization and cut its head office workforce by 25 percent.
Oil and gas production in the quarter averaged 3.8 million barrels of oil equivalent a day, down 5.3 percent from the year- earlier period, and 2.8 percent less than the first quarter, BP said. The company reiterated that full-year daily output will be between 3.8 million barrels and 3.9 million barrels.
``BP sticks to its production guidance for the year and that is positive,'' Dimitri Willems, a fund manager at ING Investment Management in The Hague, who manages about 800 million euros ($1.1 billion) in energy stocks, said today by phone.
BP and Shell both suffered setbacks in Russia last quarter at the hands of the country's state-run gas company.
OAO Gazprom last month forced a BP venture to surrender control of Kovykta, the biggest gas field in eastern Siberia. Gazprom also bought a majority stake in the Sakhalin-2 oil and gas project in April, cutting Shell's holding in half, to 27.5 percent.
Oil and gas output fell 2.2 percent last year amid project delays and Alaskan pipeline leaks. BP expects a revival in the second half when its delayed Atlantis platform in the Gulf of Mexico and other projects start.
Former CEO Browne and other BP executives yesterday won the dismissal of an investor lawsuit in New York accusing them of mismanaging the company by allowing Alaskan pipelines to deteriorate. BP has settled most of the death and injury lawsuits resulting from a Texas City refinery blast two years ago.
``Perhaps there has been a culture of cutting costs and safety when times were hard and this has led to an accident prone nature,'' said Jane Coffey, head of equities at Royal London Asset Management, which oversees about $14 billion. ``They need to reassure the market that they've got the safety aspect under control.''
BP's refining division fared better in the quarter than its exploration business, with adjusted profit for refining and marketing surging 48 percent from a year earlier to $2.74 billion while exploration and production profit fell 12 percent to $6.89 billion.
Global refining margins averaged $16.66 a barrel in the second quarter, up from $12.59 a year earlier and $9.45 in the first quarter, according to an index published by BP. Brent crude futures averaged $68.66 a barrel, 2.5 percent less than the year-earlier period.
BP's 405,000 barrel-a-day refinery in Whiting, the largest in the Midwest, suffered as crude processing units and sulfur- reducing units were shut down in the quarter for maintenance work. The refinery will resume full production in the first half of 2008, BP said today.
BP's refinery in Texas City, which hasn't been running at full capacity for months, is expected to be able to process 400,000 barrels a day by the end of the year.
by Stephen Voss and Fred Pals