David Simon, chief executive, said while demand for oil and gas continued to grow, movement of the oil price from about dollars 18 a barrel also depended on supply-side effects like the disruption in Nigeria.
The group reported a 40 per cent increase in second-quarter replacement cost net profits to pounds 335m before exceptional items, taking net profits for the half-year 36 per cent higher to pounds 640m, above City expectations.
A second interim dividend of 2.5p was declared, 19 per cent up on the previous year's 2.1p, making a total for the year so far of 5p.
The figures, which BP attributed to improved productivity, lower costs and volume growth in the face of a lower oil price, led analysts to lift profit forecasts. Nick Clayton, of Nomura Research, increased his estimate from pounds 1.325bn to pounds 1.48bn for this year and from pounds 1.645bn to pounds 1.76bn for 1995.
The half-year improvement came despite a dollars 3 fall in average oil prices. The effect on downstream profits was partly offset by a 4.5 per cent increase in hydrocarbon production, including a 27 per cent jump in gas output. Cost cuts of pounds 140m partly produced a pounds 107m turnround to a pounds 70m operating profit in chemicals.
Analysts were wrong footed in their forecasts by a cut in BP's tax rate, which fell to 29 per cent in the second quarter, compared with 33 per cent in the previous quarter and 41 per cent in the second quarter of 1993.
A writeback of previously unrelieved advance corporation tax, prior-year credits and a shift to higher profitability in lower tax regions accounted for the reduction.
That boosted BP's second- quarter net profits, which were pounds 30m higher than in the previous quarter. A firming of oil prices, particularly for Alaskan crude, boosted downstream operating profits in exploration and production by 27 per cent to pounds 479m.
The increase was almost entirely cancelled by a slump in operating profits in refining and marketing as final product prices lagged behind the rises in oil prices.
Chemical profits in the second quarter jumped by pounds 20m to pounds 45m because of higher sales of polyethylene and acetic acid and cost savings offset partly by some weakening in margins because of increased feedstock costs.
Improved levels of profits enabled BP to pay down pounds 241m of debt during the second quarter. By the end of June BP's debt was pounds 7.4bn.
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