BP's 3Q Profit Beats Estimate; Valero's 3Q Brings Net Loss of $579 Million

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BP's 3Q Profit Beats Estimate; Valero's 3Q Brings Net Loss of $579 Million

NEW YORK -- BP Plc posted third-quarter earnings that beat analyst estimates and raised its cost-cutting target for the year, while Valero Energy Corp. recorded its second quarterly loss in a row.

BP's earnings, excluding one-time items and inventory changes, fell 47 percent to $4.67 billion from a year earlier. That exceeded the $3.25 billion median estimate of 11 analysts compiled by Bloomberg.

BP expects cash costs to be approximately $4 billion lower in 2009, compared with a previous target of $3 billion, Bloomberg reported. BP has increased output in the Gulf of Mexico to counter a drop in refining profits, which have plunged by almost two-thirds.

BP's net income declined to $5.34 billion, from $8.05 billion in the same quarter of 2008, the London-based company said in a statement yesterday. Revenue fell 35 percent to $67.86 billion.

The average gas price plunged 62 percent in the third quarter.

BP aims to grab refining market share by the end of 2011, according to Iain Conn, the company's head of refining and marketing. Refining margins slid approximately 57 percent in the third quarter from a year earlier, according to BP. Profits from turning crude into fuels fell 54 percent to $916 million because of weak demand.

Meanwhile, San Antonio-based Valero reported a net loss of $219 million for its third quarter, excluding special items. This compares to net income of $1 billion for the third quarter of 2008, excluding special items.

However, similar to last quarter, Valero's retail and ethanol segments had "outstanding results," Bill Klesse, the refiner/marketer's CEO, said in a statement. "Our retail business had the highest third-quarter and year-to-date operating income in company history on strong U.S. retail fuel margins and solid performance in Canada. Our ethanol business earned $49 million of operating income in the third quarter, more than double the second quarter results, as we increased run rates at all seven ethanol plants and captured very good margins. In October, ethanol margins have continued at strong levels."

On a GAAP (generally accept accounting principles) basis, the company reported a net loss of $489 million for the quarter, compared to third quarter 2008 net income of $1.2 billion. The third quarter 2009 operating loss was $579 million versus $1.8 billion of operating income in the third quarter of 2008.

Excluding special items, the third quarter 2009 operating loss was $162 million, compared to $1.6 billion of operating income in the third quarter of 2008. The decline in operating income, excluding special items, was primarily due to lower margins on diesel and jet fuel, and smaller discounts on sour crude oil and other feedstocks, the company said.

"Our liquidity and balance sheet remain in great shape, and we will continue to focus on improving profitability by lowering costs and optimizing our system," Klesse said. "As we strive to lower costs and become even more competitive, we expect the improving world economy will drive demand growth for our products and support a recovery in refining margins and sour crude discounts. We view 2009 as a tough period for refined product demand, and we look forward to an upturn in fundamentals and demand in 2010."

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