BP Amoco's profits surge, helped by increase in price of oil

Posted: Tuesday, February 15, 2000

LONDON (AP) -- Sharply higher crude oil prices more than offset pinched margins in the refining industry to help boost BP Amoco PLC's fourth-quarter operating profit by 145 percent.

BP Amoco announced a quarterly profit for the period ending Dec. 31 of $2.12 billion, excluding one-time charges of $439 million. In the fourth-quarter a year ago, BP Amoco earned $866 million.

The result marked a striking turnaround from a year ago, when the Anglo-American company's profit plunged due to a 12-year low in oil prices and the costs of BP's buyout of Chicago-based Amoco Corp. in 1998.

''This is a very strong fourth-quarter result. It reflects the continuing underlying improvement in our businesses -- and the stronger crude price -- despite the adverse environment in the downstream businesses,'' chief executive Sir John Browne said in a statement.

The company's quarterly figures included one-time charges resulting from a loss on the closure of a joint venture with ExxonMobil in Singapore, and from severance pay for employees.

BP Amoco cut some 18,000 jobs last year, trimming its work force to around 80,000. Further reductions are possible this year, although probably not on the same scale, a company spokesman said.

BP Amoco's operating profit for the full year ending Dec. 31, adjusted for special charges, increased 40 percent to $6.21 billion from $4.43 billion in the previous year.

The earnings announcement caused the company's price per share to surge as high as 509.5 pence ($8.10) on the London Stock Exchange before slipping to 474 pence ($7.60), down 7.5 pence for the day, as investors took profits.

BP Amoco owed most of its stronger performance to a $12 per barrel increase in revenues for its exploration and production business.

However, this improvement was due largely to economic factors outside the company's control, noted Barney Gray, and industry analyst at the London brokerage Williams De Broe.

''Oil prices are phenomenally high right now, and yes, of course, (production) companies are going to be showing good results as a result,'' he said.

Output cuts by OPEC member countries began to bite last spring, causing worldwide prices to rise steadily during the rest of 1999 and into this year. The firmer prices lifted BP Amoco's adjusted profit for exploration and production to $2.68 billion, more than three times higher than what they were a year ago.

The price rise offset a 3 percent reduction in output that stemmed largely from the company's sale of oilfields in Canada.

BP Amoco's chemicals business earned a quarterly adjusted profit of $266 million, more than twice what it did 12 months ago. Lower costs, higher profit margins and expanded output all contributed to the improvement.

However, Browne acknowledged that profit margins in the refining business have been ''weak and volatile.''

The lower margins caused the fourth-quarter adjusted profit for refining and marketing to drop 8 percent to $464 million. Prices for gasoline and other refined products could not keep pace with higher oil prices, and BP Amoco cut costs by curtailing production at many of its refineries.

The company also suffered a major setback to its expansion plans earlier this month, when the U.S. Federal Trade Commission sued to stop its planned $30 billion takeover of the Los Angeles-based Atlantic Richfield Co. The FTC argued that the combined company would dominate Alaskan oil production and control supplies to West Coast refiners.

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