British oil giant BP posted a 61 per cent jump in underlying second-quarter profit thanks to high oil prices, beating analysts expectations and boosting the company's shares.
BP said today its replacement cost (RC) net income was $6.85 billion, up 6 per cent on 2007.
However, excluding non-cash charges of around $2 billion related to long-term gas contracts, the RC result was up 61 per cent at $8.63 billion, ahead of an average forecast of $7.70 billion in a Reuters poll of nine analysts.
"It's a good result," said Jason Kenney, oil analyst at ING in Edinburgh.
BP shares traded 1.8 per cent higher at 529 pence at 8.33am, outperforming a 1 per cent rise in the DJ Stoxx European oil and gas sector index.
RC profit strips out unrealised gains from changes in the value of fuel inventories and is comparable to US net income.
BP's core oil production unit was the main profit driver.
Oil prices averaged over $120 a barrel in the second quarter - almost double the level in the same period of 2007 - before rising to a record high above $147/barrel on July 11th.
The world's third-largest non-government controlled oil company by market value said production was broadly flat compared to the same period in 2007, at 3.83 million barrels of oil equivalent per day (boepd). This was in line with analysts forecasts.
A BP spokesman said the results were helped by a lower-than- expected tax rate which was due to a lag on tax payments at its Russian joint venture TNK-BP. BP is locked in a battle for control of the venture with its Russian and Russian-born partners.
Kenney said BP's shares have suffered from uncertainty over the future of the Russian assets and that now it could even be in BP's interest to sell out.
Profit at BP's refining division collapsed to $539 million from $2.7 billion in the second quarter of last year. BP's refining portfolio is focussed in the US, where it said margins halved compared with the same period last year.
BP said it would pay a dividend of 14 cents per share, slightly ahead of what analysts had expected.
The $2 billion non-cash charge related to long-term gas sales contracts was due to accounting rules, not applied in the US, which force BP to value long-term fixed-price North Sea gas sales contracts against volatile spot market prices.