BP profits weaken despite record high oil prices

Energy giant BP has said that net profits dipped in 2006, reflecting a decline in production and refining margins, despite record peaks for crude oil prices in the middle of the year.

Fourth-quarter profits meanwhile slid following recent oil price losses, combined with higher safety costs following the deadly Texas City refinery blast in 2005.

BP also saw production fall owing to supply disruptions in Alaska after a pipeline leak at Prudhoe Bay. Ouput was also hit by a cut in output by OPEC oil-producing cartel and weak demand for gas.

Net profit dropped 1.5 percent to 22.0 billion dollars (17.0 billion euros) in 2006 compared with 22.341 billion dollars in 2005, BP said in an earnings release.

Energy majors were, however, boosted last year by record high oil prices, which surged above 78 dollars per barrel on geopolitical concerns in the Middle East but have since tumbled on milder-than-expected US winter weather.

Anglo-Dutch competitor Royal Dutch Shell has booked 2006 net profits of 25.44 billion dollars, while US energy titan ExxonMobil saw earnings jump to 39.5 billion dollars last year.

BP added that annual net profit, excluding gains from the value of its crude oil inventories, rose 15 percent to 22.3 billion dollars. However, the reading fell 12.1 percent in the fourth quarter to 3.895 billion dollars, compared with the same period of 2005.

“The fourth quarter result reflects the recent declines in the overall price and margin environment, as well as operational factors and increased safety and integrity investments,” said outgoing BP chief executive John Browne.

He added: “We remain committed to addressing the recent operational issues while executing our strategy with discipline and focus.”

BP pumped an average of 3.926 million barrels of oil equivalent per day (boepd) in 2006, which marked a decline of 2.2 percent from the 4.014 million boepd recorded in 2005.

The result was also slightly below the company’s own guidance of 3.95 million boepd.

Production was also expected to flag this year, with BP aiming to pump 3.8-3.9 million boepd in 2007, the group revealed.

However, Browne added in the statement:

“We expect production of more than 4.0 million barrels of oil equivalent per day by 2009, and more than 4.3 million barrels of oil equivalent per day by 2012.”

Browne said meanwhile that crude oil prices averaged 59.60 dollars per barrel in the fourth quarter, which was 10 dollars below the third quarter but still slightly above the same period last year.

Source: AFp via news.yahoo.com