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BP Amoco tops forecasts
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May 9, 2000: 10:11 a.m. ET
UK oil company triples 1Q profit before one-time items, but shares dip
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LONDON (CNNfn) - BP Amoco reported record first-quarter earnings on Tuesday, beating analysts' expectations, as a combination of cost cuts and higher energy prices buoyed the world's second-largest publicly traded oil and gas company.
BP Amoco said replacement-cost net income, a standard measure of oil companies' profitability, rose to $2.55 billion in the quarter ended Mar. 31 from a loss of $183 million a year ago, when restructuring charges slashed profit.
Profit excluding one-time costs more than tripled to $2.71 billion, ahead of the $2.52 billion consensus among analysts polled by Reuters.
However, BP Amoco (BPA) shares fell 1.5 percent after the report. Analyst Jonathan Wright at Merrill Lynch Global Securities said BP Amoco shares had recently enjoyed a strong run - accounting for Tuesday's declines.
"Unfortunately, they came last in the pack - we've seen nearly every other company in the sector beat estimates by 10 percent," said Wright, who has an "accumulate" rating on BP Amoco shares. "The difficulty BP Amoco has is in convincing the market of its near-term growth potential. I think (the shares) will catch breath a bit here." 
Wright said he was more bullish on rivals such as U.S. giant Exxon Mobil (XOM: Research, Estimates), France's TotalFina (PFP) and Anglo-Dutch group Royal Dutch/Shell, whose London listed arm is Shell Transport & Trading (SHEL). Shell is fresh off reporting a doubling of profit, while U.S. oil heavyweights also topped Wall Street's forecasts.
All the oil producers have benefited from a sharp rebound in oil prices over the past year. Brent crude, the benchmark European blend, rose to about $27 a barrel in the first quarter of 2000 from about $11.50 last year.
U.S. regulators last month approved BP Amoco's $27 billion takeover of Atlantic Richfield. The U.K. company said first-quarter net income at the California-based oil producer jumped more than tripled to $538 million.
Profit from exploration and production, the so-called "upstream" business, almost quadrupled to $3.23 billion for the quarter. At the "downstream" end, refining also improved its profit margin as global overcapacity in the sector diminished.
Wright said BP Amoco has a lot of work to do to pep up growth in exploration and production in coming years.
"They are painting as pretty a picture as they can, but the fact is their upstream production is just not growing," added Wright. Once the company brings its African operations up to speed, BP Amoco should start to see accelerated growth patterns, he said - but warned that won't happen until about 2003.
The company said it had delivered its targeted $500 million in cost savings during the quarter.
First-quarter operating profit tripled to $3.96 billion, while exceptional costs shrank to $124 million from $860 million for the comparable period a year ago when restructuring costs depressed profit. 
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BP Amoco
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