BP Q2 profit down 53% on lower oil prices

LONDON -- Net profit for the period was $4.39 billion, down from $9.36 billion in the second quarter of last year but better than market forecasts. It was better than the $2.56 billion profit reported in the first quarter, when oil prices were in a deep slump.

Oil prices rose off those lows during the second quarter, with Brent Blend oil averaging $59.13 a barrel in the second quarter compared to $44.46 in the first quarter — and $121.18 in the second quarter of 2008.

Oil prices sagged early in the year as economies around the world went into recession, but have risen amid expectations of at least limited economic recovery later this year.

Chief Executive Tony Hayward offered a subdued outlook, saying he expected energy demand to be sluggish in the near term.

"The overall picture is of energy demand now stabilizing following significant falls in the first half of the year," Hayward said. "We see little evidence of any growth in demand and expect the recovery to be long and drawn out."

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Daily production was up 4% compared to the second quarter last year, with production ramping up in the Thunder Horse and Dorado fields in the Gulf of Mexico.

Thunder Horse, operated by BP and partly owned by ExxonMobil, began producing oil and gas last year, nine years after the field's discovery. It's designed to produce 250,000 barrels of oil and 200 million cubic feet of natural gas each day, which would make it the Gulf's largest producer.

Replacement cost profit — a key measure for oil companies which values crude oil and fuel inventories at current prices — was $3.14 billion in the second quarter, up from $2.4 billion in the first quarter and far below the year-earlier result of $6.7 billion.

"While second-quarter results showed further evidence of the considerable progress BP has made in its operational recovery, we feel this is largely discounted in valuations, with the stock now back to within 6% of its 12-month high in sterling terms," said Gordon Gray and James Evans, analysts at Collins Stewart.