Robin Pagnamenta – “BP profits hit record $13.4bn on soaring oil price”

BP profits hit record $13.4bn on soaring oil price

Robin Pagnamenta | July 29, 2008

BP, the British oil giant, unveiled a 23 per cent rise in profits this morning, boosted by record global crude prices.

Replacement cost profit, which strips out unrealised gains from changes in the value of fuel stocks, hit a record $13.44 billion (£6.7 billion) during the first half of the year, up from $10.93 billion a year ago.

During the second quarter to June 30 2008, profits rose from $6.48 billion to an all-time high of $6.85 billion.

Despite the record result, the company said that it was struggling to restore earnings from its troubled US refining division and offered little news on TNK-BP, its Russian joint venture.

BP is currently engaged in a row with its Russian joint-venture partners over control of TNK-BP, and last week its chief executive, Robert Dudley, fled Moscow and is running the business from a secret location.

Today’s results showed that the bulk of gains were derived from BP’s exploration and production division, which benefited from “higher oil and gas realisations” during the period.

Oil prices averaged more than $120 a barrel in the second quarter, nearly twice the level during the same period of 2007. Crude touched an all-time high of $147 per barrel just a few days after the end of the quarter, on July 11.

The company also reported an improvement in throughput from its troubled refining operation but said that margins had been badly squeezed during the period, wiping out any potential financial gain.

Refinery throughputs increased to 2.239 million barrels per day, up from 2.128 million a year ago, reflecting continued efforts to resolve safety and technical problems at its facilities at Texas City and Whiting, Indiana in the US.

However, BP said replacement cost profits from refining and marketing had plunged to $539 million during the second quarter, down from $2.7 billion a year ago.

The company blamed the result on poor refining margins, which it said remained “significantly lower” than in 2007, as well as lower sales volumes resulting from “higher fuel prices and lower demand”.

Average global refining margins, at $8.19 per barrel for the quarter, were less than half the $16.66 posted a year ago, although they were an improvement on $4.57 in the first quarter of 2008.

BP acknowledged that “a number of differences” had arisen between BP and AAR, its Russian joint venture partner in TNK-BP. It said it continued to work to resolve these matters but that it was “currently not possible to predict the outcome”.

The oil giant said overall oil production levels were broadly steady at 3.83 million barrels per day.

BP shares rose 1.88 per cent to 529p in morning trade.

Published in: on July 30, 2008 at 8:39 PM  Leave a Comment  

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