BP's third-quarter profits will take a $700 million battering from Hurricane's Katrina and Rita, the oil company said on Tuesday.
Between them the two weather events have sliced 145,000 barrels of oil equivalent off production compared to the previous quarter. North Sea maintenance work will take out 45,000 boe/d more than last year but the company said its average production for the year is still expected to come in within the target range of 4.1 million-4.2 million boe/d.
The quarter also saw the Thunder Horse platform in the Gulf of Mexico list dramatically and repair costs for that facility are seen coming in at $100 million.
The damage to BP from Katrina and Rita was sustained at several levels: crude and gas production was lower; runs at the Texas City refinery were reduced; and marketing margins were sliced as the cost of products soared due to shortages. With clean-up costs as well, replacement cost profit for the quarter will be more than $700 million lower than otherwise.
Although the industry's global measure of refining indicator margins showed a more than 90 per cent increase to $12.35 a barrel, BP said in its trading statement that it was only able to realize half of this rise due to lack of availability of capacity at Texas City, other hurricane related effects, and variations from the generic yield.
Marketing and retail segment margins will be storm damaged too, compared to the previous quarter, with marketing seen turning in a negative result as higher costs swept through the system.
Nonetheless, the results to be reported on Oct. 25 will come in market conditions that some other industries only hope for. The refining margin did continue to strengthen even if BP could reap only part of the gain. Widening differentials between crude grades means BP will also not gain all of the benefit of oil marker price rises which were up 19 percent quarter-on-quarter and between 43 and 48 per cent year-on-year.
In a full year, each $1 rise in the price of Brent crude boosts BP operating profits by some $500m. Brent rose by $10 a barrel between the second and third quarters.
BP said it would continue its share buyback program.