LONDON (AFP) - British oil giant BP reported a 43-percent rise in third-quarter pro forma net profit to 3.94 billion dollars (3.08 billion euros) thanks to soaring crude prices and booming demand.
But BP shares fell 0.65 percent to 534 pence in late morning trading here as analysts voiced concern that the company was struggling to keep a lid on its spending.
BP said the trading environment in the quarter was "generally stronger" than a year ago and was marked by higher oil and gas realizations and higher refining and chemicals margins.
"This has been another strong performance against the backdrop of strong global demand," said chief executive John Browne.
"We are on track against our targets of controlled investment for growth and using additional free cash flow to fund a significant level of share buybacks."
Production for the quarter was up over 11 percent to 3.91 million barrels of oil equivalent per day as its Russian joint venture TNK-BP ramped up output, partly offsetting production lost from planned maintenance work in the North Sea and Alaska, the operational impact of Hurricane Ivan in the Gulf of Mexico.
The 3.94-billion-dollar result includes net exceptional and non-operating charges of 401 million dollars compared with a net charge of 217 million a year earlier.
If these charges are excluded, the result was slightly higher than the average analyst forecast of 4.225 billion dollars.
Within the group, profits in exploration and production rose by 30 percent while refining and marketing earnings surged by 89 percent.
However, analysts voiced concerns about levels of capital expenditure, which BP expects to be slightly above 14 billion dollars in both 2004 and 2005, above its previous forecast primarily due to the weak US dollar and rising capital goods prices.
"These numbers have been creeping up due to inflation and foreign exchange (movements), and the rest of the sector looks under scrutiny here again," said Deutsche Bank analyst JJ Traynor, who has a "hold" rating on the stock.
"Having played hard for the cashflow expansion that comes with falling spending, BP has been caught out here."
Oil majors such as BP and Shell, which is due to release its results on Thursday, have been reaping bumper profits thanks to a surge in oil prices, which have soared by about two-thirds this year.
The group said Brent oil prices averaged 41.54 dollars per barrel in the third quarter, over six dollars per barrel higher than in the second quarter, mainly due to the loss of US production following Hurricane Ivan, coupled with low inventories and limited spare capacity.
Browne said refining margins have started the fourth quarter in a strong position due to concerns about winter heating oil supplies in Europe and lost refinery production due to Ivan.
10/26/2004 - 11:30 GMT - AFP