Citing unfavorable market conditions, BP plc reported decreased earnings in the second quarter relative to the second quarter of 2001. Nevertheless, the company added that “performance and growth [is] firmly on track,” and increased the company’s quarterly common stock dividend to $6 from $5.50 at this time last year.

Replacement cost profit (which strips out the effects of changing oil-inventory values), before exceptional items, for the second quarter and half year was $1.29 billion and $2.22 billion respectively, compared with $2.65 billion and $5.65 billion a year ago. BP’s second quarter pro forma result, adjusted for special items, was $2.18 billion, compared with $3.43 billion a year ago, a reduction of 36%. For the first six months, the result was $3.76 billion compared to $7.14 billion.

The company pointed to oil realizations down nearly $4/bbl, natural gas realizations down nearly $2/Mcf, and the indicator refining margin down over $3/bbl in the first half of the year, compared to last year’s first half. Demand for most chemical products has improved but margins remain weak.

“The world economy continued to recover during the second quarter and further growth is expected in the third quarter, though recent financial market weakness poses a downside risk to this economic outlook,” said BP’s chief executive, Sir John Browne.

Noting that “crude oil prices have remained firm,” Browne said “realized prices are expected to remain close to the range experienced in the second quarter, assuming OPEC production continues around current levels.” U.S. natural gas prices, however, “have softened and are at a discount to residual fuel oil. Gas in storage is at a high level and summer injections to date have been strong, despite the commissioning of new gas-fired power generation capacity.” He expects to see lower gas prices in the third quarter.

The company’s worldwide natural gas production was up slightly to 8.67 Bcf/d from 8.55 Bcf/d, while U.S. 2Q 2002 production was 3.57 Bcf/d, up from 3.55 Bcf/d. U.S. natural gas price realizations, however, were down significantly, from $4.35/Mcf in 2Q 2001 to $2.76/Mcf in the most recent quarter. Worldwide BP’s gas price averaged $2.45/Mcf in the second quarter this year, down from $3.43/Mcf in the same period last year. “North American gas realizations also suffered from widening regional differentials to the Henry Hub marker caused by short-term transportation capacity restrictions from the San Juan and Rockies basins,” the BP statement said.

Worldwide BP marketed 19.8 Bcf/d of natural gas compared to 18 Bcf/d in the second quarter of 2001. In the U.S., however, gas marketing was down somewhat to 8.45 Bcf/d in the most recent quarter, from 8.52 Bcf/d last year.

The pro forma result for the second quarter in gas, power and renewables marketing was $114 million, compared with $161 million a year ago. The reduction in the second quarter result is due to less volatile trading conditions compared to the second quarter of 2001, BP said.

“Full year production remains on track to grow at our target annual rate, as new projects, including King’s Peak, Horn Mountain and Princess in the Gulf of Mexico and Trinidad LNG train 2, are due on stream during the second half of the year,” Browne said. Also, “capital expenditure is on track for the upper end of the year’s target range of $12-13 billion, excluding acquisitions. The net debt ratio was below the mid-point of the 25-35% range at the end of the second quarter and is likely to remain relatively stable around this level.”

©Copyright 2002 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.