BP Profit Cut by $700 Million

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BP Profit Cut by $700 Million

LONDON -- BP plc, Europe's largest oil company, said damage caused by hurricanes Katrina and Rita cut third-quarter profit by more than $700 million and led to the company's first quarterly drop in oil and gas production in two years, according to Bloomberg.com reported.

BP's shares posted their biggest decline in 10 months after the company cut its full-year production forecast by as much as 3.2 percent. Third-quarter output was about 3.8 million barrels of oil equivalent a day, 2.8 percent less than the 3.91 million reported in the year-earlier period, London-based BP said today on Bloomberg.com .

According to the report, BP, led by CEO John Browne, is one of the first oil companies to detail costs arising from the storms. Katrina and Rita have so far halted production of 8.2 percent of the region's total annual output, damaging facilities owned by Royal Dutch Shell plc and Exxon Mobil Corp., among others.

"Investors shouldn't underestimate the level of damage that's been done," Bertie Thomson, a fund manager at Aberdeen Asset Management plc in London, which oversees $6.5 billion in European stocks, including BP told Bloomberg.com .

Shares of BP fell by 2.7 percent, the biggest one-day drop since Dec. 2. The stock has gained 29 percent this year, surpassing the 14 percent increase by the U.K.'s FTSE 100 Index, to which it belongs, according to Bloomberg.com .

BP has made some $90 billion of purchases in the United States in recent years to become the world's second-biggest investor-owned oil company, after Exxon. It has expanded into markets including Russia, seeking new deposits as fields mature, Bloomberg.com reported.

The company lowered its full-year average production target by 130,000 barrels per day because of storm damage, Toby Odone, a BP spokesman, told Bloomberg.com . Previously, BP said average output this year would be between 4.1 million and 4.2 million barrels a day.

The $700 million loss is equivalent to less than 1 percent of BP's second quarter revenue. BP's replacement cost profit for the second quarter, which excludes changes in inventory value, was $4.98 billion, 29 percent more than a year earlier. Sales in the period were $87.8 billion, reported Bloomberg.com . Third-quarter results will be reported on Oct. 25.

Goldman, Sachs & Co. today slashed its full-year net income estimate for BP by $1.7 billion, or 6.6 percent, following BP's statement . BP's full-year profit will be $23.56 billion, down from an earlier estimate of $25.22 billion, Goldman's Matthew Lanstone, a London-based analyst, said in an e-mailed report to Bloomberg.com .