- The Washington Times - Tuesday, October 24, 2006

LONDON (AP) — BP PLC’s third-quarter profit declined by 3.6 percent, slumping on lost Alaskan production, higher taxes in Britain and a sharp drop in gasoline prices.

BP, which has experienced a run of difficulties in the United States, also lowered its average daily oil production forecast for 2006 because of asset sales and snags at several oil fields.

The first of the major oil companies to report quarterly earnings this week, BP said net income for the three months ended Sept. 30 came to $6.23 billion, compared with $6.46 billion in the third quarter of 2005. Revenue climbed 4 percent to $70.7 billion.

Production for the period averaged 3.8 million barrels of oil equivalent per day, down 0.2 percent from a year ago and down 5 percent from the second quarter this year.

Other oil majors including Chevron, ConocoPhillips, Exxon Mobil and Royal Dutch Shell are expected to reveal solid profits this week, but analysts say earnings in the sector have passed their peak after the recent slump in gasoline and natural-gas prices.

The results from BP reflected the company’s U.S. woes.

The company halved production at its Prudhoe Bay field in Alaska, the largest in the U.S., after severe pipeline corrosion and a small leak were uncovered. Production has now reached 400,000 barrels per day, double the low point but still below the previous average of 450,000 barrels per day.

It has also delayed the opening of its Thunder Horse platform in the Gulf of Mexico — damaged by Hurricane Dennis last year — from 2007 to the middle of 2008 because of equipment failures. The platform is the largest in the Gulf and is expected to produce 240,000 barrels of oil and 200 million cubic feet of natural gas per day.

BP said it is now likely to pump 3.95 million barrels a day in 2006, compared with earlier forecasts of 4.1 million to 4.2 million barrels a day.

“Overall the trading environment is now weaker than it has been for the last five quarters,” said Chief Executive Officer John Browne.

As well as its U.S. production troubles, BP was faced with higher taxes in Britain’s North Sea and lower refining margins. The company’s effective tax rate was about 40 percent in the third quarter, compared with 36 percent in the second quarter.

The average price of a barrel of Brent crude, a key North Sea benchmark, rose 13 percent in the third quarter compared with a year earlier.

But average profits from refining fell 32 percent year-on-year after being boosted in the year-ago period by the impact of hurricanes.

BP’s adjusted net profit — earnings before extraordinary items and excluding changes in the value of inventories — was $4.5 billion. That was slightly worse than the $4.74 billion expected by analysts.

BP shares gained 1.1 percent to close at $11.40 on the London Stock Exchange.

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