BP flags strong second-quarter results

by The Associated Press

British oil company BP PLC said July 2 it expects stronger second-quarter earnings, amid oil and natural gas prices that remain high despite a recent dip.

However, it also warned that the profit margin from its U.S. gas-trading activities would be "significantly lower" in the quarter because of a decline in market volatility.

In April, BP reported its highest-ever quarterly net profit — $4.27 billion, three times higher than its results the previous year.

The surge was due to stratospheric oil prices tied to the war in Iraq, coupled with supply disruptions in the key producing nations of Nigeria and Venezuela.

At the same time, U.S. gas prices were also sky-high because an especially cold winter elevated demand at a time when gas storage levels hit a record low.

In February, BP Chief Executive John Browne said the company would be steering clear of setting specific production targets, opting instead for "indicative ranges," after it was forced to lower its outlook three times last autumn to 3 percent from 5.5 percent.

BP said refining margins in the second quarter will probably be lower than last quarter, though the retail environment is expected to improve, since falling oil prices have boosted demand despite the worldwide economic slowdown.

The decline in refining margins, particularly a 7 percent decline on the U.S. West Coast, led Merrill Lynch to cut its second-quarter net income forecast for BP by around $50 million to $2.88 billion.

However, this is still a 32 percent increase from the $2.18 billion net profit BP reported in the second quarter of last year.

BP is expected to report second-quarter financial results July 29.