Downhill drive

London, April 5 (Reuters): BP’s production of oil and gas fell in the first quarter of 2006 compared with the same period last year. However, the company has achieved a better-than-expected performance in its refining business.

The world’s second-largest listed oil company by market capitalisation said in a trading statement on Wednesday that it produced 4.025 million barrels of oil equivalent per day (boepd) of oil and gas in the first quarter.

This was short of the 4.1 million boepd some analysts forecast and down from the 4.1 million boepd BP produced in the first quarter of 2005. Previously, rapid growth at BP’s Russian joint venture, TNK-BP, slowed sharply as operations were hobbled by an extremely cold winter.

More worrying for investors was the second consecutive year-on-year fall in non-Russian production ? BP’s most profitable ? which Citigroup and JP Morgan said had fallen short of their forecasts.

Nonetheless, BP previously indicated its 2006 production growth hopes would largely rely on field start-ups in the second half of the year and JP Morgan said it stuck to its full-year output forecast of 4.2 million boepd, the upper end of BP’s target range. The production disappointment was offset by better-than-expected refining news, a lower-than-expected tax rate, lower interest charges and a significant improvement in margins at BP’s gas and power unit. BP's shares rose 0.4 per cent to 667 pence at 0845 GMT (9:45 a.m. British time) compared to a 0.1 per cent rise in the DJ Stoxx European oil and gas sector index SXEP.

“Generally, it was a positive trading statement with more positives than negatives,” said Dominic Ellis, oil analyst at Man Securities.

BP said refining margins fell in the fourth quarter, but Citigroup and JP Morgan said the result still beat their forecasts.