BP posts heavy Q4 refining losses on outages, costs

05 February 2008 08:21  [Source: ICIS news]

SINGAPORE (ICIS news)--BP has posted sharp fourth-quarter refining losses on outages and higher costs but the UK oil giant said on Tuesday it will pump up investment to raise output and cut more than 5,000 jobs in a major restructuring programme by mid-2008.

 

Fourth-quarter replacement cost operating losses for the refining and marketing business reached $1.34bn (€898m), compared with a $312m profit in the same period of 2006, BP said.

 

For full-year 2007, the segment’s replacement cost operating profits plunged to $2.62bn, from $5.28bn the previous year.

 

Meanwhile, at group level, BP’s fourth-quarter replacement cost profits fell 24% to $2.97bn, from the same period of 2006, while its full-year profits were down 22% to $17.29bn.

 

The fourth-quarter results reflected lower refining margins, higher refining outages and costs, including those associated with the repair and recommissioning activities at its Texas and Whiting US refineries, and a lower contribution from supply optimisation, BP said.

 

Chief executive Tony Hayward said its profits were very disappointing, especially in its refining and marketing, which included much of its remaining chemical activities.

 

“The principal reason is poor reliability in some of our US refineries, which is compounded by the complexity and overhead structure of the business segment,” he added in a statement on the company’s website.

He was now confident of reducing corporate overheads by 15–20% in a restructuring programme announced in October.

 

“The steps we have already initiated will cut BP’s headcount by some 5,000 by the middle of next year. This is in addition to the 9,500 jobs that will move off the payroll as a result of franchising our US convenience retail business,” Hayward added.

A major scheduled turnaround at its Toledo refinery also affected its earnings.

 

For 2007, its refining throughput fell 71m bbl/day from the previous year to 2.1bn bbl/day, while chemical output dipped 0.3% to 14.03m tonnes.

 

To support growth, BP’s group capital spending was expected to increase from around $19bn in 2007 to between $21bn and $22bn this year, Hayward said.

 

Refining capacity at Whiting would recover to 300,000 bbl/day, he said, adding that its Texas plant was on track to restore most of its economic capability by mid-year.

Restructuring costs were some $350m in the fourth quarter of last year and he expected it to total around a further $1bn in 2008, with material benefits feeding through in 2009.

“We are absolutely determined to transform our downstream business as a whole", Hayward said.

 

“It will not happen overnight but we believe that the performance gap with our competitors can be progressively narrowed in the next few years,” he added.

 

The disappointing BP results come less than a week after rivals ExxonMobil and Shell announced record profits.

($1 = €0.67)

 

 

By: Florence Tan
+65 6780 4359

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