BP’s 1Q 2006 Profit Drops 15%; Oil Production Down

25 April 2006

First quarter crude oil production 2005-2006. Click to enlarge.

BP reported that its first-quarter profit dropped 15% to $5.6 billion from the first quarter of 2005 due, the company said, to a decrease in production and increase in taxes.

Revenue in the first quarter 2006 was up 21% from the prior year, climbing to $68.565 billion from $56.671 billion, buoyed largely by the rise in oil prices.

The increase in prices has not been driven by the fundamentals of supply and demand. There has been no shortage, and in fact inventories of crude oil and products have continued to rise. There is, however, nervousness in the financial markets about the potential for supply disruption as result of the loss of an estimated 500,000 barrels per day of production in Nigeria, the continued conflict in Iraq and the political uncertainties affecting Iran. That seems to be the reason why prices have risen.

—Lord Browne, BP CEO

BP’s total crude oil production dropped 1.9% during the quarter to 2.360 million barrels per day from 2.405 million barrels per day for the period in 2005. BP attributed the drops mainly to weather-related impacts—i.e., the hurricanes in the Gulf of Mexico and the resulting impact on the Mars platform.

Compared to the first quarter of 2005, production was essentially flat after taking account of the effect of severe weather disruptions, according to BP.

BP’s share of oil production from BP-TNK, the company’s Russian joint venture, rose 2.4% in the first quarter of 2006 to 896,000 barrels per day, up from 875,000 in 1Q 2005. This accounts for 20% of the increase in BP’s “Rest of World” oil production.