BP profit drops less than expected as output falls

BP Plc posted a 1 percent drop in quarterly post-tax profit to $6.087 billion as production fell and refinery outages prevented the oil giant from taking full advantage of near-record refining margins.

London-based BP said in a statement that the drop in its second-quarter replacement cost net profit would have been larger had it not been for non-operating gains totaling $741 million, largely from the sale of oil fields and a UK refinery.

Stripping this gain out, the replacement cost profit, which excludes out changes in the value of inventories, fell 12.5 percent to $5.346 billion.

This was ahead of an average forecast of $4.975 billion in a Reuters poll of 10 analysts, partly due to a lower-than-expected 5 percent drop in oil and gas production to 3.804 million barrels of oil equivalent per day (boepd).

BP's shares rose 0.5 percent to 604-1/2pence at 0742 GMT, outperforming a 0.14 percent rise in the DJ Stoxx European oil and gas sector index.

One analyst said the results should stop the relentless downgrading of BP's earnings forecasts that has happened after the past two results statements disappointed investors.

BP shares have been hit by a series of operational problems in the past two years including major project delays, oil spills, allegations of market manipulation and a refinery explosion which killed 15 workers, which prompted the company to slash its growth targets.

Investors are looking to new Chief Executive Tony Hayward, who took over in May after former boss John Browne stepped down amid revelations about his private life, to chart a return to growth.

This job is made more difficult by a growing trend for governments from Venezuela to Russia to reserve the richest oil and gas fields for their national oil companies rather than invite western oil majors in to exploit the reserves.

The world's third-largest non-government controlled oil company by market value said industry inflation and the need to invest more in improving safety also weighed on profits.

Outages at U.S. refineries meant the crude processing business operated at only 83 percent capacity -- just as margins rose strongly. Rivals such as Exxon Mobil Corp regularly achieve utilization rates above 90 percent.