BP Profits Fall By 44% On Weak Oil Prices

BP's profits for the second quarter have almost halved as the company continues to grapple oil price weakness.

It (Other OTC: ITGL - news) reported a 44% fall in underlying replacement cost profit, the benchmark industry measure, over the three-month period to $720m (£550m) compared to a year earlier.

The figure excludes one-off items and fluctuations in the value of inventories to give a full reflection of trading profitability.

BP's net loss for the period narrowed to $1.4bn from $5.8bn in the second quarter of 2015.

The company said that figure reflected a pre-tax charge of $5.2bn it had already announced for costs related to the Deepwater Horizon disaster in 2010.

:: BP Pays Billions To Settle Gulf Spill Cases

BP sought to draw a line under the incident earlier this month, saying it estimated the final cost of the spill - including fines, litigation and environmental costs - at $61.6bn.

Commenting on the results, BP boss Bob Dudley said: "Compared with a year earlier, the underlying second-quarter result was impacted by lower oil and gas prices and significantly lower refining margins, but this was partly offset by the benefit of lower cash costs throughout the group as well as lower exploration write-offs."

BP's cost action has included cutting around 10% of its workforce and slashing investment to help protect itself from the oil price weakness.

Brent crude is currently trading below $45 a barrel.

It is a consequence of supply continuing to outstrip demand in the world economy but today's prices are a considerable improvement on January when Brent was costing below $30.

BP said it was hoping for a $50-$55 price range next year.

Nicholas Hyett, equity analyst at Hargreaves Lansdown (LSE: HL.L - news) , said: "It looks like BP is betting on a speedy return to higher oil prices.

"If that appears, then BP will have protected its shareholders through the tough times.

"But if oil does not rebound, then BP will become progressively weaker in an environment where strength matters."

BP's share price, which is 21% higher in the year to date, fell 3% on Tuesday's opening.