BP Is `Well-Placed' to Weather Crisis After Profit Increases

By Eduard Gismatullin

Oct. 28 (Bloomberg) -- BP Plc, Europe's second-biggest oil company, said it's ``well-placed'' to cope with the financial crisis after posting an 83 percent increase in third-quarter profit on record crude and higher natural-gas prices.

Net income increased to $8.05 billion, or 42.56 cents a share, from $4.41 billion, or 23.07 cents, a year earlier, the London-based company said today in a statement. Excluding one- time items and inventory changes, earnings beat analysts' estimates for the third straight quarter.

Crude has slumped more than 50 percent since reaching an all-time high of $147.27 in New York on July 11. Although oil prices may fall further, BP is in a position to ``cope with such volatility,'' Chief Executive Officer Tony Hayward said in a statement. The company is ready to ``benefit from the business opportunities that may well arise from a downturn,'' he said.

``BP should still deliver one of the best year-on-year earnings per share growth rates,'' Dresdner Kleinwort analyst Colin Smith wrote in a note before the earnings were released. BP had the ``most profitable barrels in the period.''

Excluding one-time items and gains or losses from inventories, profit was $8.88 billion. That beat the $6.82 billion median estimate from 10 analysts in a Bloomberg survey.

``Our balance sheet is strong and we have committed less of our portfolio to high-cost options like tar sands and gas conversion than some of our peers,'' Hayward said in today's statement.

BP jumped as much as 7.8 percent in London trading and was 24.5 pence higher at 462.5 pence as of 8:07 a.m. local time.

Slower Growth

BP stock fell 20 percent in the third quarter on concern that a slowing world economy will crimp demand for fuel. That compared with a 22 percent drop for larger rival Royal Dutch Shell Plc, which reports earnings in two days.

New York oil futures were on average 57 percent higher in the third quarter compared with a year earlier. Natural-gas futures were up 44 percent. Crude has since slid close to a 17- month low on declining demand for fuel in the U.S., the world's largest importer of crude.

BP will pay a quarterly dividend of 14 cents a share in December, up from 10.825 cents last year. The company bought back 269.8 million shares for $2.9 billion in the first nine months of the year, it said today.

Of the 31 analysts tracked by Bloomberg who cover BP, 20 recommend buying the shares, 9 advise holding the stock and two say ``sell.''

Boost Output

Hayward pledged earlier this year to boost output 13 percent in the next five years to 4.3 million barrels of oil equivalent a day. BP is budgeting an average oil price of $60 a barrel to keep production above 4 million barrels a day through 2020.

Last month, BP bought Arkansas natural-gas properties from Chesapeake Energy Corp. for $1.9 billion, tapping fuel from rock formations that are more costly to exploit than traditional fields. The purchase followed BP's $1.75 billion acquisition of Chesapeake's assets in Oklahoma's Woodford Shale formation back in July.

BP also settled a dispute over the running of the company's joint venture in Russia with its billionaire co-owners after Hayward agreed to replace TNK-BP's CEO Robert Dudley.

The accord left BP with its stake in the 50-50 venture intact while acceding to demands by the Russian billionaires -- Mikhail Fridman, German Khan, Viktor Vekselberg and Len Blavatnik, collectively known as AAR -- for a more independent board. TNK-BP accounts for almost a quarter of BP's global output and reserves.

Hurricane Shutdown

BP was forced to halt its 475,000-barrel-a-day Texas City refinery for three weeks on Sept. 11 as Hurricane Ike swept through the region.

Oil shipments through the BTC pipeline, which transports Azeri crude blend from the Caspian Sea to Turkey's Mediterranean Sea, have been disrupted since August. BP also suffered a shutdown from its Angolan Greater Plutonio fields of about two months after an equipment failure.

BP's Global Indicator Margin, a broad measure of refining profitability, averaged $8.03 a barrel in the third quarter, unchanged from a year earlier, according to BP's Web site.

BP will hold a conference call on the third-quarter earnings at 2 p.m. London time.

To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net