BP Unfazed By Yukos Arrest

BP's chief executive, Lord Browne, insisted yesterday that the weekend arrest of Russian oil magnate Mikhail Khodorkovsky had not influenced his group's attitude towards investment in the country or its confidence in the Putin administration.

News of the arrest of Mr Khodorkovsky, the head of Yukos, Russia's largest oil company, sent shockwaves through Russia's financial markets on Monday.

But when asked yesterday if the arrest of Mr Khodorkovsky signalled an increase in political risk for investors in Russia, Lord Browne said: "We are in Russia for the long term ... and nothing that has happened in the last few days has changed our attitude. We don't think it relevant to what we are doing. We still have confidence in the government of Russia."

Announcing third quarter figures yesterday that showed BP had pushed net profits up by a quarter to $2.87bn (£1.7bn), Lord Browne revealed that in its first 33 days, its Russian joint venture, TNK-BP, had a positive impact of $105m on BP's net income.

Although it was still early days, Lord Browne said the results from TNK-BP were "encouraging".

Asked if BP was planning further acquisitions in Russia, Lord Browne said TNK-BP had to operate within certain constraints, including requirements about how much it had to pay shareholders and the need to be self-funding.

If a good opportunity came up, the shareholders could decide to commit more funds, but "it would have to fit with [our] strategy".

He was very cautious about the involvement of western oil companies in Iraq, arguing that it would happen "later rather than sooner". It would depend on when there was a structure with sufficient sovereignty and whether there would be a national oil company working exclusively, a national oil company along with contractors or individual oil companies. "The security structure is almost the third consideration," he said.

Lord Browne described yesterday's figures, which were at the low end of City expectations, as "another good quarter and a strong financial result".

"We continue to invest steadily against a clear set of strategic goals and to drive hard on operations where there is room for improvement."

Higher crude oil prices boosted BP's exploration and production division, and refining and marketing turned in a stronger performance. Lord Browne said the group had paid $650m in additional pension fund contributions in the third quarter and would put in another $1.35bn in the final three months of the year.

One consequence of additional pension funding announced in July was that the group would not be continuing its share buyback programme in the fourth quarter, although Lord Browne said it remained committed to "buying back shares during periods of strong cashflow".

Citigroup analyst Jon Wright said there might be a tinge of disappointment on the buy-back front but the scope for that was limited.

Investors will receive a quarterly dividend of 6.5 cents a share, up from 6 cents the previous year. In sterling terms, however, the dividend payment is 3.857p - down slightly on the same period last year because of exchange rate changes.

BP shares fell 3.5p to 408.5p. "Despite the muted share price reaction this was a good set of quarterly figures from BP," said analysts at Dresdner Kleinwort Wasserstein.