In the first half of the year BP reported a 21 per cent increase in profits on a replacement cost basis, to pounds 1.2bn after exceptional costs. Underlying profits before exceptional items rose by 23 per cent in the second quarter, to pounds 648m. The results were hit by a 57 per cent slump in earnings from chemicals divisions between April and June, to pounds 114m. In addition, there was an exceptional loss of pounds 52m made on the sale of a BP America office complex in Cleveland, Ohio.
The chairman, Sir David Simon, said he was "absolutely delighted" with the figures. He said his confidence in continued improvements in profits was behind the decision to increase the dividend substantially from 4.25p to 5p a share in the second quarter.
John Browne, who took over from Sir David as chief executive last year, underlined the commitment - unveiled in March - to pay out 50 per cent of the company's earnings in dividends over the medium term . He said that this was "sustainable", after making adjustments for unusually large or unexpected movements in oil prices.
The boost to the dividend had come earlier than many City analysts were expecting. Paul Spedding, from the investment bankers Kleinwort Benson, raised his full-year forecast to 19.5p, an increase of 28 per cent on 1995. He said: "BP is the star pupil in the oil sector. Every time it sets itself targets it improves on them."
Commenting on speculation of an impending share buy-back, BP said the board had not considered the option, though the company did reduce its debt levels by pounds 1bn worth of debt in the first half of the year.
Apart from the dividend payout, Mr Browne said BP was also on course to hit its $6bn annual investment target. He said new oil discoveries could double production to 2 million barrels a day by the turn of the century.
But technical problems had contributed to a six- month delay in the start- up of production at the Foinaven field, West of Shetland, which would probably now take place in the spring.
Like other oil companies, BP benefited from the surge in oil prices in the spring to some of their highest levels since the Gulf war. BP's oil sold for an average price of $19.5 in the second quarter of this year, compared with $17.8 last year. This helped to raise profits in the exploration and production division by 40 per cent to pounds 751m.
In the petrol refining and marketing business income increased by 57 per cent, to pounds 209m, despite the adverse impact of the UK petrol price war. Mr Browne said he was expecting approval from the European Commission for the merger of petrol retailing operations with Mobil. BP was "ready and waiting to proceed" and was on course to meet its target to save $400m to $500m from the joint venture. The company was also planning to open 100 outlets in Poland, Spain, South Africa and Malaysia.Reuse content