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BP rides 3Q oil bonanza
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November 7, 2000: 1:29 p.m. ET
Oil and gas powerhouse rides high crude prices; core profit rises 94 percent
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LONDON (CNNfn) - BP Amoco PLC reported Tuesday a 94 percent increase in third-quarter underlying profit, matching analysts' forecasts, as the world's No. 3 listed oil company profited from cost cuts, acquisitions and crude oil prices hovering near 10-year highs.
The Anglo-American company reported pro forma earnings before one-time items rose to $3.79 billion, from $1.95 billion a year ago. The figures exclude costs for integration and amortization of goodwill after its $27-billion buyout of U.S.-based Atlantic Richfield Co. and two smaller purchases.
Analysts had expected core earnings of between $3.6 billion and $4 billion, with the average estimate coming in at $3.7 billion. The company raised its third-quarter dividend to 5.25 cents from 5 cents.
John Brown, BP Amoco's chairman and chief executive, credited high oil prices, which translate into better margins in the company's
"Behind all that, our performance, our self-help performance, has been improving. We've been cutting costs and we've been improving productivity and increasing the volume we produce of product through existing plant and equipment," Browne said in an interview with CNN's Tom Bogdanowicz. "We are quite confident." 
The results were "a bit better than consensus ... but not dazzling," said Jon Wright, an oil industry analyst with Merrill Lynch in London. The company has benefited from savings as a result of buying Atlantic Richfield and Amoco, said Wright, predicting investors would look to a planned meeting next February as a chance to judge whether the improvements are sustainable.
Some analysts are concerned a possible decline in oil prices from current highs means profits for oil companies such as BP Amoco have peaked.
"There are a lot of people who are skeptical and need convincing," said Wright. "What we want to know is what their updated growth targets will be."
Shares of BP Amoco (BPA), the second-most valuable company on the London Stock Exchange after mobile-phone operator Vodafone Group (VOD), rose 0.5 penny, or 0.1 percent, to 567.5 pence.
Gains both upstream and downstream
BP Amoco said profit in its exploration and production, or "upstream" operations, rose 67 percent to $3.65 billion before one-time items, while earnings in marketing and refining, known as the "downstream" business, climbed 66 percent to $1.06 billion.
 High crude oil prices make upstream activities more profitable for oil companies. The company attributed gains in downstream results to cost reductions and the initial contributions from its acquisitions.
However, BP Amoco also said production, excluding the benefit from acquisitions, fell 3 percent in the quarter in its upstream activities. Browne admitted the company is "a little concerned, but not surprised" about that but said expansion of capital expenditures should help reverse that slump ahead.
BP Amoco, fresh off a buyout binge, is now buckling down to focus on integrating its new assets and further deals aren't likely to be on its agenda. "This stage of the company is to bed down what we've got," said Browne. "We are putting in place capital expenditure plans now."
The announcement by BP comes days after Anglo-Dutch rival Royal Dutch-Shell reported an 80 percent jump in its third-quarter profit. U.S. rivals Exxon Mobil Corp. (XOM: Research, Estimates) and Texaco Inc. (TX: Research, Estimates) each recently reported a near doubling of quarterly profit.
Mark Iannotti, an oil analyst with Schroder Salomon Smith Barney in London, said before BP's earnings release that the industry's rosy times may be nearing an end, in part because he expects oil prices to retreat in 2001.
"The Q3 and Q4 are likely to be the top of the earnings cycle for these companies," said Iannotti, who currently has a "neutral" rating on both BP Amoco and the oil sector as a whole. "That's on the back of expectations that commodity prices will fall next year."
 Crude oil prices have been hovering near 10-year highs in recent months as demand in industrialized nations remains high and many producers are at or near full output capacity. On Tuesday, benchmark Brent crude for December delivery traded at $31.27 a barrel in London, little changed from the previous day.
Oil companies in Britain have faced political pressure in recent weeks as truck drivers and motorists complained firms are unfairly profiting from high oil prices and putting a squeeze on consumers. Truckers in Britain are preparing a new round of protests against the government if it fails to cut fuel taxes to ease the oil-price pinch. 
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