BP remains optimistic as profits slump 53%.

Byline: Iain Laing

OIL giant BP has announced a 53% slump in profits but insisted that it continues to steer "a steady course through choppy waters".

The haul of pounds 1.9bn between April and June was well down on the pounds 4.1bn seen a year ago when oil prices were approaching record high levels.

However, chief executive Tony Hayward said the figure was 30% higher than the first quarter of the year, helped by a 4% rise in BP's daily production to more than four million barrels of oil equivalent in the three months.

He added: "We are in turbulent times, volatile and uncertain. But we continue to steer a steady course through choppy waters."

Despite the inevitable impact of falling crude prices on profits, BP has shown signs of progress in turning around years of under-performance, particularly in its refining operation.

Two years into the turnaround programme, Mr Hayward said BP was making good progress in growing its exploration and production business, as well as turning around its downstream operations and improving efficiency.

He added that the company's target for a reduction of pounds 1.21bn in costs in 2009 had already been exceeded, with a further pounds 607m saving expected over the rest of the year.

The company reduced headcount by 3,000 last year and is on track for another 5,000 by the end of 2009.

"We will continue to push efficiencies into the group and make sure every dollar counts," Mr Hayward said.

As well as cost savings and produc-tiogains, BP's performance against the previous quarter has been helped by firmer oil prices amid hopes for a recovery in the world economy.

Mr Hayward 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."

BP's rival Royal Dutch Shell is also due to report results this week, with analysts expecting second quarter profits of around pounds 1.45bn.

Analysts said BP's profit and cost-saving figures were ahead of expectations, although this failed to prevent a modest fall in its share price yesterday.

Peter Hitchens, an analyst at Panmure Gordon stockbrokers, said the company's underlying performance appeared to be better than its rivals.

"The company is now starting to see its much-promised production increases and is starting to close the gap with its peers on the downstream operations. The company should therefore show a better performance than its peers over the next year."

BP maintained its second-quarter dividend payment at 14 US cents a share, a rise of 21% in sterling terms.

CAPTION(S):

CONFIDENT BP has hit turbulent times but insists that it can steer "a steady course through choppy waters".