Hurricane season hits BP output

Oil giant BP reported a fall in production today as it continued to suffer from damage caused by last summer’s brutal hurricane season.

BP said output fell to 4.01m barrels of oil a day in the second quarter - down from 4.04m barrels in the first quarter and 4.11m barrels this time last year.

The London-based firm also set aside US$500m (€390.55m) to cover legal claims resulting from an explosion at its Texas City refinery in March 2005 which killed 15 people.

The price of Brent crude soared to $69.53 (€54.31) a barrel in the three months to June 30, compared with $61.79 (€48.26) in the first quarter and $51.63 (€40.33) a year ago.

That should ensure profits still rise to more than £12bn (€17.29 bn) this year, against $19.3bn (€15.08 bn) a year ago.

Oil analyst Bruce Evers, of Investec Securities, said the production figures were “a bit of a disappointment” but added that output is likely to pick up in the second half as its Thunder Horse platform in the Gulf of Mexico comes back on stream.

Thunder Horse – one of the largest platforms in the world – was badly damaged by last summer’s hurricanes.

BP was also hit by changes to Venezuelan law which meant that it had to shift its assets in the country to a state-controlled joint venture.

In a trading update earlier this year, BP said it expected to produce between 4.1m and 4.2m barrels a day this year compared with 4.01m in 2005 and 3.99m in 2004.

The London-based company was bullish about its refining operations today, where margins were higher than in the first quarter and last year.

However, the Texas City refinery is still operating below full capacity following the explosion. The phased re-commissioning of Texas City began at the end of March.

It said margins at its gas, power and renewables arm were also expected to be higher in the second quarter thanks to an improved performance in North America.

Rising profits have enabled BP to return billions of dollars to shareholders. The company said it bought back 376m shares in the second quarter for $4.5bn (€3.516bn).

Richard Griffiths, of Williams de Broe, said: “What happened in the Gulf of Mexico last year delayed the growth in production to the back end of 2006.

“In the second half of the year we should start seeing production pick up presuming Thunder Horse comes on stream.”

It also emerged today that BP had suspended three traders at the centre of an alleged propane price-fixing scandal.

Regulators in the US have filed a lawsuit against the company over claims that it bought up large amounts of propane in February 2004 and withheld it from the market to drive prices higher.

BP denies any wrong-doing, although former employee Dennis Abbott has already pleaded guilty in a federal district court in Washington to taking part in a conspiracy “to manipulate and corner the propane market”.

The company is also facing a criminal investigation into a massive oil spill in Alaska in which 270,000 gallons of crude leaked into Prudhoe Bay.