Failed Angolan exploration hits BP profit but results beat expectations

The company increased its oil-and-gas production by nearly 10% compared with a year earlier and has begun feeling the full effects of $7 billion in cost cuts enacted last year, said Chief Financial Officer Brian Gilvary in an interview.

BP reported underlying profit on a replacement cost basis of US$684 million for the second quarter of the year, down from US$1.5 billion for the first quarter.

“ We continue to position BP for the new oil price environment, with a continued tight focus on costs, efficiency and discipline in capital spending.

The CFO's statement comes after BP's chief executive Bob Dudley described the era of $100 oil prices as an "aberration" in an interview with IBTimes UK.

Sales and other operating revenues climbed to $56.51 billion from prior year's $46.44 billion last year.

BP said its oil and gas production would be broadly flat in the third quarter as further project start-ups outweigh the effect of maintenance.

BP's share price rose over 2.5% in early London trading, as the company's results beat analyst expectations. Oil and gas output was 10% higher at 3.54 MMbpd, in part reflecting a deal to buy into a large concession in Abu Dhabi.

"While net debt rose primarily due to Gulf of Mexico payments, we expect this will improve over the second half as these payments decline and divestment proceeds come in towards the end of the year".

The company can now cover most of its expenses and dividends with cash instead of debt, he said-a key metric of success in today's oil industry.

That was down from $720m a year earlier and $1.51bn in the first quarter. Indeed, payments in relation to the spill were $2.0bn in the second quarter and $4.3bn in the first half of 2017. The company reached a $20 billion settlement in 2015 with federal and state authorities that must be paid out over nearly two decades. BP's profit and cash flow have consistently lagged behind its peers.

Oil companies have been cutting costs and selling assets to adjust to lower oil prices, which early a year ago plunged to their lowest levels in more than a decade.

Upstream major projects on track; two new projects sanctioned in quarter; significant gas discoveries in Senegal and Trinidad announced; $753 million exploration write-off, predominantly in Angola.

"BP has underperformed its peers recently and we would expect some of that underperformance to reverse in the near term", wrote Biraj Borkhataria, an oil-company analyst for RBC Capital Markets, in a note Tuesday.