Profit cuts

BP's profits more than halved in the second quarter of 2009 as a result of falling energy demand and oil prices.

The energy giant reported replacement cost profits for the period at $3,140m, compared with $6,746m a year earlier, but said these results were in line with expectations due to difficult market conditions.

Net cash provided by operating activities was at $6.8bn, up from $6.7bn in 2008, and daily production was up by four per cent to more than four million barrels of oil. The group's dividend for the quarter was 14 cents a share, the same as for the second quarter of 2008.

Tony Hayward, chief executive of BP, said that despite the current climate, the company was making progress through its restructuring programme and announced that the $2bn reduction in cash costs for the year had already been achieved. The company is now seeking to cut a further $1bn for the remainder of the year.

He said: 'We have already surpassed the target we set ourselves at the beginning of this year for cash costs but we are by no means complacent. Our view remains that the right current balance is to continue to pay the dividend and maintain investment to grow the company. We will continue to use the capacity of our balance sheet while the industry cost structure adjusts.'

Looking ahead, Hayward said that year-on-year production growth is forecast to continue in the second half of 2009, however, seasonal maintenance turnarounds will impact the third quarter.

He added that long-term recovery is likely to be sluggish, and said: ‘The overall picture is of energy demand now stabilising following significant falls in the first half of the year. We see little evidence of any growth in demand and expect the recovery to be long and drawn out.’