LONDON Oct 25 BP Plc will seek to reassure
investors on Tuesday that its turnaround following the Gulf of
Mexico oil spill is on track.
The British oil company is expected to report a 9 percent
fall in third quarter profits as the sale of oil fields to pay
for the Macondo spill hits production and counters the positive
effect of high oil prices.
Most rivals are predicted to post profit increases of over
30 percent, thanks to an almost 50 percent rise in Brent oil
prices compared to the third quarter of 2010.
"BP is likely to have another difficult quarter," said
Bernstein oil analyst Oswald Clint in a note to clients.
BP is expected to report replacement cost (RC) net income,
excluding one-offs, of $5.03 billion for the last quarter, a 9
percent fall compared to the same period last year, according to
a Reuters poll of nine analysts.
Replacement cost profit strips out unrealised gains and
losses related to changes in the value of fuel inventories, and,
as such, is comparable with net income under U.S. accounting
As well as suffering the impact of a shrunken production
base, BP's oil and gas output has been diminished by an overhaul
of its facilities as the company seeks to improve safety.
Platforms are routinely shut to complete repairs or conduct
maintenance but twice as many facilities had been closed in the
third quarter as usual, a spokesman said.
Investors, who were receptive to previous Chief Executive
Tony Hayward's promises to improve safety while cutting costs,
have not reacted well to BP's recent operational weakness.
The company's shares have languished for a year and current
CEO Bob Dudley has acknowledged being under pressure.
In an attempt to woo sceptics, BP has made a series of high
profile announcements this year regarding new ventures and on
Tuesday Dudley is expected to highlight growth opportunities at
a press conference -- something the company only usually hosts
at full year and half-year results.
However, the collapse of a much-vaunted $16 billion share
swap and multi-billion dollar Arctic exploration deal with
Kremlin-controlled Rosneft has dented investor confidence in the
On top of that BP still faces potential fines and damages
claims worth tens of billions of dollars in the United States
related to the Macondo disaster.
Nonetheless, analysts say an operational turnaround may have
"Our expectation is that the third quarter will prove the
high point of maintenance and that operational performance will
improve significantly in the fourth quarter," analysts at
This may not be enough for investors, some of whom have
called for a restructuring of the group.
Few analysts believe BP should follow the example of U.S.
rivals Marathon Oil and ConocoPhillips which
spun off their crude refining units -- BP has been selling
refineries for years and the remaining assets are mostly
integrated into upstream ventures or key to the group's
lucrative oil trading operations.
Some disgruntled shareholders have called for a breakup of
the whole group - selling BP's half-share of Russia's third
largest oil producer, TNK-BP, and spinning off the U.S. assets,
leaving a rump operation focussed on Angola, Azerbaijan and some
other international fields.
Dudley has said he is looking at all options but BP insiders
say no major strategic overhaul is imminent. The group usually
provides shareholders with an extensive strategy update each
year in February or early March.