BP plc’s quarterly earnings jumped 42% compared with a year ago, as higher commodity prices and a strong liquefied natural gas (LNG) business lifted exploration and production income — despite a 5% overall decline in production. Meanwhile, Amerada Hess Corp. also was helped by higher commodity prices, despite a 50% drop in upstream earnings after selling some of its producing assets.

BP’s earnings, on a pro forma basis and adjusted for special items, were $3.1 billion, compared with $2.199 billion in 2Q02. Replacement cost profit, before exceptional items, was $2.454 billion, compared with $1.311 billion a year ago.

“U.S. natural gas prices fell back in the second quarter but remained high, with the Henry Hub first of the month index averaging $5.40/MMBtu,” said Lord John Browne, the BP Group CEO. “Gas price differentials in the Rockies have narrowed significantly following the opening of the Kern River pipeline expansion.” Browne noted that high prices “have instigated a number of market reactions. These, together with mild weather, have led to a series of very high storage injections in recent weeks, despite falling domestic production. Prices look set to stay above residual fuel oil parity during the third quarter.”

The London-based major credited its earnings rise to a 38% rise in natural gas prices as well as a 9.2% increase in prices for liquids. Noting the “more favorable trading environment,” BP’s natural gas sales volumes grew 23% from a year ago, and equity LNG sales rose 58%. In the United States, gas volume sales were 10.4 Bcf/d in the quarter, compared with 8.5 Bcf/d a year ago. However, U.S. sales were down sequentially from the first quarter’s 11.7 Bcf/d.

Higher prices helped to offset BP’s 5% year-over-year decline in hydrocarbon production — 2% adjusting for divestments — and 3% sequential decline, also attributed to asset sales. Production worldwide was 3.37 MMboe/d in the quarter. In the first six months of this year, BP’s production has fallen 1% overall, but it said that “declines in existing profit centers were as expected and more than offset by growth from new profit centers, particularly Trinidad and deepwater Gulf of Mexico.”

New York City-based Hess reported quarterly net income of $252 million, including gains on asset sales, compared with income of $149 million a year ago. Income from continuing operations was $63 million. Hess gained through the sale of Gulf of Mexico shelf properties, the Jabung Field in Indonesia and several small United Kingdom fields for approximately $445 million, but the sales contributed to high production losses.

On a boe basis, Hess’s quarterly production worldwide was 376 MMboe/d for the quarter, down from 469 MMboe/d a year ago. In the United States, Hess averaged 291 Mcf/d in the first half of the year, compared with 408 Mcf/d for the first six months of 2002. NGL sales in the United States averaged 10 bbl/d for the first six months, compared with 13 bbl/d in the first half of 2002. The average U.S. natural gas selling price for the second quarter, including the effect of hedging, was $4.09/Mcf, a 53 cents/Mcf increase from 2Q02.

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