BP May Seek Acquisitions After Posting Higher Profit

By Eduard Gismatullin

Oct. 28 (Bloomberg) -- BP Plc, Europe's second-biggest oil company, may seek acquisition targets and intends to boost future dividends after posting an 83 percent increase in third- quarter profit on higher crude and natural-gas prices.

Net income advanced 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.


Chief Executive Officer Tony Hayward said the global financial crisis may ``create opportunities for us and we will look at those very closely.'' Although oil prices could extend their 57 percent decline from July's record, BP is in a position to ``cope with such volatility,'' Hayward added. The company increased its quarterly dividend by 29 percent.

``It's a pretty robust performance and that was a very big increase in the dividend,'' said Colin Morton, who helps manage about 1 billion pounds ($1.6 billion) at Rensburg Fund Management in Leeds, England. ``In the short-term, profitability will come under pressure'' as oil prices fall, he said.

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.

BP jumped as much as 7.8 percent in London trading and was 23 pence higher at 461 pence as of 10:18 a.m. local time. Revenue rose 44 percent to $104.6 billion in the quarter.

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.

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

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.

``Our aim remains unchanged - to grow that dividend through time in line with our view of future sustainable performance,'' Hayward said.

Capital spending was estimated at around $21 billion to $22 billion for the year, in line with the company's previous forecast.

U.S. Refining

Adjusted earnings from refining and marketing rose more than fivefold to $1.97 billion after the return of BP's refineries in Texas City, Texas, and Whiting, Indiana.

The plants have a combined processing capacity of 895,000 barrels of oil a day, according to the U.S. Energy Department.

``Refinery turnaround activities are expected to be higher in the fourth quarter than in the third,'' the company said.

Production in the third quarter was little changed as new projects offset hurricane-induced shutdowns in the U.S. and other disruptions in Angola and Azerbaijan. A second well was started at BP's Thunder Horse field in the Gulf of Mexico.

Crude oil and gas output totaled 3.66 million barrels of oil equivalent a day, compared with 3.65 million barrels in the year-earlier quarter.

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.

Chesapeake Transactions

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.

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.

BTC Disruption

Oil shipments through the Baku-Tbilisi-Ceyhan 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.

The company bought back 269.8 million shares for $2.9 billion in the first nine months of the year, it said today.

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