BP's oil production down in Q1 but refining cheers

LONDON, Apr 5: Oil giant BP Plc said its production of oil and gas fell in the first quarter of 2006 compared to the same period last year, but it signalled a better-than-expected performance at its refining business.

The world's second-largest listed oil company by market capitalisation said in a trading statement on Wednesday that it produced 4.025million barrels of oil equivalent per day (boepd) of oil and gas in the first quarter.

This was short of the 4.1 million boepd some analysts forecast and down from the 4.1 million boepd BP produced in the first quarter of 2005.

Previously rapid growth at BP's Russian joint venture, TNK-BP, slowed sharply as operations were hobbled by an extremely cold winter.

More worrying for investors was the second consecutive year-on-year fall in non-Russian production -- BP's most profitable -- which Citigroup and JP Morgan said had fallen short of their forecasts.

Nonetheless, BP previously indicated its 2006 production growth hopes would largely rely on field start-ups in the second half of the year and JP Morgan said it stuck to its full-year output forecast of 4.2 million boepd, the upper end of BP's target range.

The production disappointment was offset by better-than-expected refining news, a lower-than-expected tax rate, lower interest charges and a significant improvement in margins at BP's gas and power unit.

BP's shares rose 0.4 percent to 667 pence at 0845 GMT compared to a 0.1 percent rise in the DJ Stoxx European oil and gas sector index.

''Generally, it was a positive trading statement with more positives than negatives,'' said Dominic Ellis, oil analyst at Man Securities.

REFINING AHEAD OF FORECASTS

London-based BP said refining margins fell in the fourth quarter, but Citigroup and JP Morgan said the result still beat their forecasts.

''Globally, refining margins in Q1 were 13 percent ahead of our expectation,'' Citigroup said in a research note.

BP also flagged unexpected operational improvements at the unit which converts crude into gasoline and diesel, including lower maintenance outages, seasonally lower costs and savvy trading of crude and products.

This was expected to offset lower refining and marketing margins, compared to the fourth quarter, BP said.

Refining margins have fallen across the industry but BP said the prices it received for its oil and gas output in the first quarter broadly reflected the rise in market benchmarks such as Brent crude, which rose to an average of more than a barrel from almost in the previous quarter.

This suggests the oil major will post another bumper set of earnings later this month.

REUTERS