Crisis-hit BP has bounced back from problems in Texas, corroded pipelines in Alaska and Hurricanes in the Gulf of Mexico to report a rise in third-quarter profits.
They say that bad things happens in threes, and BP
(LSE: BP.)
will probably be hoping that events at Prudhoe Bay will mark the end of its spell of ill fortune.
Ironically, BP could not put a foot wrong for many years. It seemed that bad things only happened at archrival Royal Dutch Shell
(LSE: RDSB)
. But an explosion at BP's Texas City refinery in March 2005 put paid to the idea that winning streaks can least forever.
A few months after the accident in Texas, BP's Thunder Horse oil platform was bashed by first by Hurricane Dennis, then by Hurricanes Katrina and Rita. According to BP, the offshore drilling station is not expected to be operational again until 2008. And just when it seemed that things could not get any worse, the company was forced to close part of its Prudhoe Bay oil fields in Alaska because corrosion was discovered in many of its pipelines.
But despite the disasters, BP has bounced back today with a 58% rise in third-quarter profits. The oil giant made £3.7b in the three months to September, up from £2.4b last year. However, underlying profits, which exclude asset disposals, were down 4% to £3.4b.
Significantly, BP has lifted its third-quarter dividend, which suggests the company may be confident of meeting full-year estimates. Currently, it is pencilled in for annual profits of £11.4b in 2006, and profits of £11.8b in 2007. This values BP at 10 times forward earnings, which is a 23% discount to the market. The shares, which rose 2p to 603p, yield 3.7%. This is above the market average and may be another indication that they are undervalued.
To the uninitiated, BP looks like a company in crisis. And question marks over the safety of BP's operations may cast a shadow over the company. But with oil prices expected to remain high, and BP forecast to produce over 4m barrels of oil equivalent a day, you can't help but ask, "Crisis? What crisis?"
David owns shares in Royal Dutch Shell.
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