BP says mergers helped build $14.2 billion in profits
BP PLC Chief Executive Sir John Browne Tuesday unveiled pro forma 2000 profits of $14.2 billion for the UK oil and gas giant, more than double its result for the previous year. Browne said the record profits, up from $6.2 billion in 1999, were not just due to oil prices, but partly because of the success of its mergers with Atlantic Richfield Co., Amoco Corp., and Burmah Castrol PLC.
LONDON, Feb. 13�BP PLC Chief Executive Sir John Browne Tuesday unveiled pro forma 2000 profits of $14.2 billion for the UK oil and gas giant, more than double its result for the previous year.
Browne stressed that the record profits, up from $6.2 billion in 1999, were "not just about oil prices, but about the success of (its) mergers in 2000 (with Atlantic Richfield Co., Amoco Corp., and Burmah Castrol PLC)."
"The strong trading environment, together with the benefits of recent integration and restructuring and productivity improvements, has produced an outstanding worldwide result," he said.
The exploration and production segment contributed $15.7 billion to BP's bottom line, aided by high oil and gas prices, the "contribution from ARCO," and lower operating costs.
BP's refining and marketing business turned in profits of more than $4.9 billion in 2000, due to higher refining margins among other factors, but its gas and power division's profits, at $186 million, were down slightly on 1999, when it brought in $211 million. Its chemicals business result for 2000, at just over $1 billion, was up fractionally.
BP lost some $1.1 billion year-on-year to its Other Businesses and Corporate division, which covers interests including the group's finance, BP Solar, coal and aluminum assets, and its investments in PetroChina and Sinopec.
Production of oil and gas grew in 2000 by 4%, a figure Browne said would rise to 5.5% this year. He acknowledged that "it is certainly true to say that some of this production was purchased," referring to production "brought in" via the merger with ARCO. Without ARCO's contribution BP's output would have dropped by 2%.
In the fourth quarter of 2000, production of oil and gas totaled 1.93 million b/d, down from 2.05 million b/d a year earlier. The fall was entrained by lower capital spending in 1999, said BP. Natural gas production climbed by more than a third to 8.62 bcfd.
"We are optimistic about the long term future demand for oil and gas," noted Browne. "In fact we think oil demand over the next 10 years will be equal to total consumption in the first five decades of the last century."
Plans to boost production from new developments to generate some 1.3 million b/d by 2005 depending to a substantial degree on BP's deepwater US Gulf of Mexico portfolio, including the 1 billion bbl Crazy Horse field and the recently discovered Crazy Horse North.
Brown also highlighted BP's recently discovered Paladio field off Angola and Red Mango field off Trinidad as likely production "giants" in the coming years.
Browne said that 2000 had been "a great year for exploration," with the company increasing its proven reserves from 13.7 billion boe to 15.2 billion boe. Over the year, he said, the company replaced 160% of its production, booking 1.78 billion boe.
Analysts Lehman Brothers said the BP results were "very closely in line" with its forecast, noting that though BP's underlying production had fallen last year, the company had "pumped hard to capture high gas prices in the UK and US," and that its reserve replacement efforts were "very strong."
Browne said BP's strategy was "unchanged" from that spelled out to investors last July. The company, he said, in the process of "blending" the portfolio acquired through the various mergers of 2000, had trimmed some $4.9 billion out of the company costs. "There will more (cost reductions) in 2001 and 2002," he added.
Capital expenditure for 2001, he said, would be "in the range of $12-$13 billion," roughly $1 billion lower than was forecast last year. Browne said the decision to reduce capital expenditures from earlier calculations to historic levels had come about after going over budgets with "a fine-tooth comb" and was in keeping with a philosophy of "capital discipline at a time when revenues are so high."
Return on average capital employed (RoACE) on a pro forma basis and adjusted for special items, was 23% compared with 13% in 1999. In the fourth quarter BP's RoACE was 25%, up from 17% a year ago.