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BP may see profit too low

09 January 2009 09:29 (UTC +04:00)

Baku. Vahab Rzayev â€“ APA-Economics. The fall in oil prices will cost BP about $6bn in pre-tax profit in the fourth quarter of the year compared with the third quarter, according to figures posted on the companyâ€™s website.
BPâ€™s shares fell sharply on Wednesday after the companyâ€™s investor relations department talked to analysts about their forecasts for its results for the fourth quarter, which are due to be published on February 3, reported Financial Times.
The greatest effect on profits will come from falling prices; oil averaged $55.48 per barrel for Brent crude in the fourth quarter, down from $115.09 per barrel in the third quarter.
BPâ€™s rule of thumb is that each dollar movement in the oil price adds or subtracts $400m from a full-yearâ€™s pre-tax profits, implying that a $60 per barrel drop in the price of oil will cost about $6bn (Â£3.95bn) in a quarter.
However, analysts have begun to focus on the effect that a sustained period in which oil costs less than $50 per barrel will have on company profits and cash flows.Tony Hayward, chief executive, said he expected costs to fall, both because of a general cooling in the industry that will ease shortages of equipment and skilled staff, and because he is continuing his drive to cut costs in the company, going beyond the 5,000 job cuts already announced.