BP's energy trading shows boost from U.S. Polar Vortex

Tue Apr 29, 2014 9:16am EDT

* BP reports strong Q1 gas and oil trading results

* Energy major had slightly lower refined oil volumes

* Polar Vortex created extraordinary volatility in US mkts

By David Sheppard

LONDON, April 29 (Reuters) - BP Plc became the latest energy company on Tuesday to show strong trading results in the first quarter as the coldest winter in three decades in the United States provided a boost to many power and gas dealers.

The energy major said its trading operations had helped offset lower returns elsewhere in the group. It cited "strong gas marketing and trading results and higher gas realizations," which is industry jargon for a profit increase resulting from extraordinary volatility in gas prices.

The so-called 'Polar Vortex' in the United States briefly upended the U.S. natural gas market, with physical prices at the primary New York trading hub spiking more than 20-fold in one day during January as utilities scrambled to secure supplies.

Those trading conditions have led a number of firms, including Wall Street banks Goldman Sachs and Morgan Stanley, to report higher-than-expected returns from their energy trading arms in the first quarter.

"Overall results were strong in both gas and oil trading globally in the first quarter," said BP spokesman David Nicholas in London, declining to give more details.

BP is by far the biggest trader of physical natural gas in the United States, according to data from the Federal Energy Regulatory Commision (FERC), and is also an active trader of electricity supplies. Its results also include its global liquefied natural gas (LNG) business.

While BP doesn't break out revenues for its trading operations, it did report slightly lower year-on-year levels of refined product sales and trading, pointing to particularly strong results in its gas and power operations.

In the first quarter, BP sold 5.2 million barrels per day (bpd) of refined products through its marketing and trading operations, down from 5.4 million bpd in the same quarter last year. Its refineries processed 1.7 million bpd of crude during the same period this year.

"The supply and trading result was strong for the first quarter, similar to levels achieved in the same period of 2013," BP said in its quarterly statement to shareholders.

BP on Tuesday reported a 24 percent drop in overall first-quarter underlying replacement cost profit to $3.2 billion, slightly ahead of a consensus forecast of $3.1 billion.

Trading makes up a bigger part of BP's operations than at many other energy majors. Rivals such as Exxon Mobil say that while they market their oil and refinery output to customers, they don't actively trade.

Its annual report in February revealed that BP had benefited in the first six months of 2013 from big swings in crude oil prices, with the U.S. benchmark WTI contract sharply narrowing its discount to international benchmark Brent.

Its massive 405,000 bpd refinery in Whiting, Indiana, is expected to increase the amount of heavy, discounted Canadian crude it processes to 280,000 bpd in the second quarter from around 200,000 bpd, the company said.

The last time BP disclosed its annual trading results in 2005 it showed earnings of $2.97 billion, or over a tenth of its overall net profit that year. (editing by Jane Baird)