BP has clearly impressed the markets with 3Q results showing bigger than expected savings from its cost-cutting programme, and a better underlying profit than consensus forecasts.
Revenue and profits were of course lower, year-on-year, due to lower oil and gas prices. But markets appear to have been impressed by upstream production, the lifeblood of a big hydrocarbon company, which was almost 7 per cent higher at 3.917m barrels of oil equivalent per day.
In this, BP’s year-on-year performance has been benefited from more clement weather. As Standard & Poors notes:
The Q3 09 results were in line with our expectations and just above Bloomberg consensus. In our view, there were no surprises; however the shares rose 4.5% after the release, in what we view as an overreaction. The market probably picked up on a 7% rise in hydrocarbon production y-o-y (2.2% lower q-o-q), but we note annual production figures are not comparable given Q3 08 was marred by hurricanes and production shut-downs.
As quick look at the US Hurricane Center reports for July, August and September this year shows all three were considerably quieter than usual for the North Atlantic. This compares to last year, when Hurricane Ike caused a shut-in of BP’s massive Texas City refinery.
BP provides the hurricane-adjusted figures itself – they accounted for almost half of the increase:
Production for the quarter was 3,917mboe/d, 7% higher than the third quarter of 2008. This increase primarily reflects continued strong operational performance and the absence of hurricanes, which impacted the third quarter of 2008. After adjusting for entitlement impacts in our production-sharing agreements (PSAs) and the effect of OPEC quota restrictions, the increase was still 7%. Adjusting for hurricanes, which impacted our production in the third quarter of 2008, production was 4% higher. Unit production costs in the quarter were 18% lower than the third quarter of 2008 after adjusting production for the impact of hurricanes.
The relative lack of weather-related shut-ins helped boost refinery availability to 94.3 per cent this year, compared to 87.7 per cent in 2008. But that in itself hints at a growing headache for most of the integrated oil companies these days: growing product stocks and subsequent falls in refinery utilisation and margins.
Related links:
BP lifts cost-cutting target by $1bn (FT, 27/10/09)
Unrepeatable results from BP? (FT Alphaville, 27/10/09)
Oil and the white swan non-event (Scarce Whales, 20/09/09)
