BP reports record half-year profits

BP has reported record profits of $10.7 billion (£6 billion) for the first half of 2005.

This represents a massive hike in profits for the comparable period for 2004 as the oil giant benefits from a rising demand for oil around the world.

BP said that second quarter replacement cost profit was $4,981 million compared with $3,873 million a year ago, an increase of 29%. For the half year, replacement cost profit was a record $10.47 billion compared with $8.14 billion, also up 29%.

BP Group Chief Executive, Lord Browne, said: "Our record first half financial results could not have been delivered without the significant investments made over the last decade. These are capturing the benefit of the strong trading environment. Discipline in returning capital to shareholders after continuing to invest for the future is allowing us to reduce the number of shares outstanding, further improving per share performance."

Quarterly figures revealed that BP's Exploration and Production division's second quarter result was up 38% on a year ago reflecting "higher realizations" in both liquids and gas and higher volumes, partially offset by higher operating costs and revenue investments.

The Refining and Marketing division's result reflected improved refining margins, lower retail marketing margins and a higher net charge for non-operating items compared with a year ago. However, in Gas, Power and Renewables the result decreased compared with a year ago due to lower contributions from the gas marketing and natural gas liquids businesses.

Interest and various other finance expenses of $162 million for the quarter were down from $201 million in the previous quarter a decrease which BP said related primarily to the absence in the second quarter of costs associated with the early redemption of finance leases in the first quarter of 2005.

BP's oil production platform Thunder Horse was damaged in adverse weather caused by hurricane Dennis last month has been stabilised, though there may be a delay in placing the platform online as there is to be an inquiry by the US Coast Guard.

BP also faced a substantial charge of $700 million for personal injury compensation following a fire at a Texan refinery earlier this year. The explosion and resulting fire at the refinery installation near Houston killed 15 and injured over 170 people.

Looking ahead Lord Browne said that the outlook for the rest of 2005 was not as promising as the first half-year.

He said: "The outlook for retail margins remains uncertain with continuing crude and product price volatility. Rising product prices have dampened margins over the past few weeks and have contributed to a weak start to the third quarter.

"Our strategy is unchanged. We continue to execute it with discipline and focus. Our ability to capture the benefit of current prices and margin strength underpins continued dividend growth and further increases in share buybacks which we expect to be at least $6 billion in the second half of 2005 subject to market conditions and constraints. Capital expenditure is expected to be around $14.5 billion for the year and around $15 billion in 2006.

(SP/KMcA)