BP admits hurricanes will cost it $1bn

BP YESTERDAY admitted it faced lost profits and a repair bill of nearly $1 billion from last year's US hurricanes and an explosion at its Texas City refinery.

Hurricane Katrina, the costliest US hurricane on record, devastated energy installations in the Gulf of Mexico when it struck in August. It was followed by a fresh wave of damage from Hurricane Rita in September.

As it reported that hurricanes Rita and Katrina had also hit oil production during Q4, BP said the overall impact on profits during the period was expected to be "in excess of $400 million", higher than the previous quarter.

BP estimated cuts in profits for the third quarter of $500m and for the fourth quarter of $400m as a result of shutting down the Texas refinery and instituting the necessary repairs, but was unable to give an exact date for when full production could begin at the plant.

The oil group said overall oil production for Q4 is expected to have been about 4.01 billion barrels of oil equivalent per day (boepd), slightly less than its forecast last October of between 4.1 and 4.2 billionboepd.

Despite the financial hit from hurricanes, most analysts expect that record oil prices will keep Europe's biggest company by market capitalisation on course for bumper annual profits for 2005 next month.

Merrill Lynch cut its fourth-quarter earnings forecast by 7 per cent following the statement, but BP is still expected to report bumper full-year profits next month. For the first nine months of the year, BP made profits of $14.88bn - a 25 per cent rise on a year earlier.

The consensus in the City is that BP, led by Lord Browne of Madingley, will generate full-year profits of more than 19bn for the current year and more than 21bn during 2006, with the oil price showing little signs of slowing down. Shares in BP were down just 3p at 640.5p.