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BP Amoco 2Q profit jumps
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August 10, 1999: 11:37 a.m. ET
Surging oil price, rising output lift earnings 13.6%; more U.S. job cuts set
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LONDON (CNNfn) - BP Amoco posted strong second-quarter results Tuesday and said it will eliminate another 2,000 jobs, mostly in the United States, as the global oil giant continues to cut payrolls following the merger that created it.
BP Amoco, the world's second-largest publicly traded oil firm, posted a 13.6 percent rise in underlying replacement cost profit to $1.226 billion in the quarter, toward the upper end of expectations, as the surging price of oil highlighted the strength of its exploration and production business.
Analysts' estimates had ranged from $1.14 billion to $1.28 billion.
The earnings exclude a $141 million charge related to the merger last year between British Petroleum and Amoco that created the company. Including one-time items, profit climbed 19 percent to $1.367 billion.
Second-quarter earnings per share rose 8 percent to 13 cents from 12 cents a year earlier.
BP Amoco, whose $26 billion merger with U.S.-based Arco (ARC) remains under review by competition authorities, announced plans last month to sell $10 billion of assets and boosted its cost-cutting target to $4 billion by the end of 2001. Last week it sold its Canadian oil properties for $1.07 billion.
The company said productivity gains added $550 million to the second-quarter result.
BP Amoco also increased its target for job reductions following the takeover of Amoco at the start of the year. The original target of 10,000 was met at the end of July, and last week was raised to 12,500.
BP Amoco said Tuesday it now expects to shed 14,500 jobs by the end of the year, 15 percent of its total at the start of the year. Most of the additional 2,000 jobs are expected to go in the United States.
Analysts said BP Amoco's relative strength in upstream businesses of exploration and production allowed it to weather the drain on profit from refining, where global over-capacity has pulled margins down. The company's relative emphasis on oil over gas production also boosted the results, as oil prices have climbed faster than gas.
"What we are seeing is a very high return on capital employed," SG Securities analyst John Toalster told Reuters. "Whereas BP Amoco was only in fourth place amongst the oil majors in the first quarter of 1999, in the second quarter it's almost at the top."
Exploration and production profit rose 54 percent while downstream (refining and marketing) profit fell 29 percent.
The BP Amoco results follow a week after rival Royal Dutch/Shell posted its own upbeat numbers.
The average price of oil climbed 26 percent in the second quarter to $18.27 a barrel, while benchmark Brent oil futures for September delivery rose to $20.48 a barrel Tuesday. BP Amoco is planning future production commitments on the basis of an oil price around $11 per barrel.
BP Amoco (BPA) shares added 0.7 percent at 1,222 pence in afternoon trading Tuesday after earlier being ahead almost 2 percent. The company's stock has soared from below 900 pence since oil prices bottomed out at $10 in late February.
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BP Amoco
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