BP has 13 p.c. drop in profit

Press, 18 February 1989, Page 30

BP has 13 p.c. drop in profit

NZPA-Reuter London Oil giant, British Petroleum, has announced a 13 per cent drop in 1988 profits because of a weaker dollar and lower crude oil prices. BP, Britain’s biggest company, ranks fourth among oil multinationals in sales, after Anglo-Dutch Shell group and USbased Exxon Corp and Mobil Oil Co. BP posted net income of £1.21 billion ($NZ3.468), down from £1.398 ($NZ3.978) the previous year. This was on a so-called historic cost basis, valuing the firm’s oil stocks on what they cost to acquire.

On a replacement cost basis, using the current market price for oil to value its stocks, net income rose to £1.448 from £1.318.

The chairman, Sir Peter Walters, told shareholders he saw a continued threat of an oil glut and price volatility in 1989. “For BP, reduced profits upstream as a result of lower oil prices are partially

offset by good margins in the downstream oil and chemical businesses. These may not be as high as in 1988 because of intensifying competition.” BP was still looking for opportunities to add value to its core businesses. He said the planned sale of mining interests would reduce assets outside oil and chemicals to less than 10 per cent of operating capital. By the end of 1988, BP had net proved crude reserves of 5.22 billion barrels, around .219 million more than last year. It produced 539 million barrels during the year. Sir Peter said the joint effect of the SUS4.3B sale of the company’s minerals interests and a $U51.958 buy-back of a chunk of its shares held by the Kuwait Investment Office would increase the group’s debt ratio. But he said he was confident the company could generate strong cash flows even with a weak oil price and dollar.