BP profits lower than anticipated

BP posted lower-than-expected profits today in a further sign of the pressure on the firm as it looks to reverse its fortunes in the wake of the Gulf of Mexico disaster.

The British supermajor reported profits in the three months to June of $5.3n, compared to a loss of $16.9bn in the same period a year ago.

The results are likely to enrage cash-strapped motorists who are facing soaring prices at the petrol pumps while BP generates an albeit lower-than-expected profit.

The firm has benefited from higher oil prices, driven up in the period by political unrest in the Middle East and North Africa, as well as higher refining margins – the difference between the value of crude oil and the products for which it is used.

But gains were offset by an 11% drop in production in the three months as a result of the suspension of drilling in the Gulf of Mexico and $25bn of asset sales.

BP’s shares fell 2% today after the results came in below City expectations for replacement cost profits of $6bn, compared with the reported figure of $5.3bn.

Oil prices began to climb early this year as political turmoil spread from Tunisia through Egypt and on to Libya. Supplies were constricted by civil war in Libya, which pushed prices even higher.

BP said the average cost of Brent crude in the period was $117.04 a barrel – a 50% increase compared with $78.24 in the same period last year.

The company also said it was benefiting from improved refining margins – up to 13% from 11%.

The improvement came as the cost of petrol at the pumps hit 135.6 pence per litre in June, according to the Office for National Statistics.

The Gulf of Mexico clean-up continued in the quarter – with $6.8bn now paid out in claims and in government payments to fund economic and environmental restoration.

BP said the total charge for the Deepwater Horizon incident, which killed 11 men in April last year, reduced by $600m in the quarter as it received settlement payouts from partners in the Macondo well.

The charge was $40.9bn at the end of 2010, which includes the 20 billion US dollar fund set up to deal with claims arising from the spill.