BP's Quarterly Profit Jumps 30%

Rising Demand, Oil Costs Cited; CEO Plans to Resign in '08

Lord John Browne, group chief executive of British Petroleum (BP) speaks during a press conference in London July 25, 2006. British energy giant BP reported record high second-quarter earnings on Tuesday on the back of soaring crude oil prices and despite a drop in output. (Odd Andersen - Afp/getty Images)

BP PLC, the world's second-largest publicly traded oil company, reported second-quarter profit of $7.27 billion, or about 36 cents a share, up 30 percent from last year as crude oil prices soared and refining earnings blew past expectations on strong demand, especially from U.S. motorists.

The biggest boost came from higher prices for crude oil and natural gas. The company's global oil and gas production amounted to 4 million barrels a day, and it sold that for an average of $65.96 a barrel for oil, up from $47.79 in the second quarter of 2005. Natural gas prices also rose sharply.

Other major oil companies are also expected to report record earnings this week.

"Record oil prices obviously pushed their earnings to a record level," said Fadel Gheit, an oil analyst at Oppenheimer & Co. "It's basically a market-driven environment. It's not company-driven."

Revenue rose 25 percent, to $74.01 billion.

BP's earnings came despite a slew of recent problems in its U.S. operations -- including leaks in its Alaska pipeline; price-fixing charges against some of its former propane traders; and slow repairs at its huge Texas City, Tex., refinery, where an explosion last year killed 15 people. The company said it made a provision of $500 million to cover compensation claims from the refinery explosion, in addition to $700 million it set aside earlier.

The company also said problems discovered during a test would delay the start-up of its Thunder Horse natural gas production platform in the Gulf of Mexico until early next year. In addition, BP said that the Atlantis South oil project in the Gulf of Mexico has been delayed and that its cost had risen sharply.

Meanwhile, BP chief executive John Browne, who has been the company's top executive for 13 years and presided over the takeover of U.S. majors Amoco Corp. and Atlantic Richfield Co., said he would resign at the end of 2008 after he turns 60, the company's mandatory retirement age. He would not say who would take over, but he told Bloomberg News in an interview that "there are more than three" candidates.

In a conference call yesterday, Browne denied a report published in yesterday's Financial Times that said he had clashed Friday with BP Chairman Peter Sutherland, who was concerned that Browne would try to stay past 2008. Browne said, "There is no drift -- no rift between Peter Sutherland and me."

Browne said that he would continue to work after 2008, though not at BP. "Think of it as a job change," he said.

Meanwhile, he is presiding over continued strong earnings. Profit from refining crude oil into products like gasoline leaped 46 percent since the second quarter of last year, also a strong quarter for the company, and twice as high as the first quarter of this year. "Refining margins have been on a tear despite high oil prices because demand remains strong," Gheit said.

The company also benefited from its investments in Russia. Earnings from exploration and production venture there rose 18 percent.

Browne said he would increase 2006 capital spending by as much as $1 billion, to $16 billion, though rising costs for oil exploration services purchased from other firms might mean little change in activity, analysts said.

BP shares fell 23 cents yesterday, to $69.51.