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Last Updated: Tuesday, 26 July 2005, 06:42 GMT 07:42 UK
Strong oil demand lifts BP profit
BP filling station
The firm is gaining from a "strong trading environment"
Oil giant BP has unveiled record first-half profits on the back of rising world demand for oil.

The UK firm made replacement cost profits of $10.47bn (6bn) in the first half of 2005 against $8.14bn last year.

The company, the world's second biggest by market value, has also benefited from soaring global oil prices in 2005.

BP's said net replacement cost profit was $4.98bn in the three months to the end of June, up 29% on the $3.87bn recorded in the same period a year ago.

"Our record first half financial results could not have been delivered without the significant investments made over the last decade," said BP chief executive Lord Browne.

"These are capturing the benefit of the strong trading environment."

'New resources'

Earlier this month BP said its realisations for oil products - actual sales receipts - moved in line with rising industry gains.

Production was 3.5% higher than last year, helped by its TNK-BP joint venture in Russia, and new exploration in places like Azerbaijan and the Gulf of Mexico.

The company has also recently made new discoveries in Egypt and Angola.

"There has to be higher spending, but I think they are doing that on the research and development front," said Elissa Bayer of Gerrards stockbrokers.

Rising product prices have dampened margins over the past few weeks and have contributed to a weak start to the third quarter
Lord Browne, BP chief executive

"They have always got to find new resources - I know they are drilling in Mexico, Russia and other parts of the world."

BP's Thunder Horse oil platform, one of its biggest under development, was damaged earlier in July after Hurricane Dennis battered the Gulf of Mexico.

Thunder Horse was set to start pumping oil later this year, and peak output was expected at 250,000 barrels a day.

The project was meant to start pumping by the end of 2005 at the latest, but this may be delayed for six months until a US Coast Guard inquiry is completed.

Refinery blast

BP also said it was paying a charge of $700m in respect of all fatality and personal injury compensation claims associated with the incident at its Texas City refinery on 23 March.

In May, BP accepted responsibility for a "series of failures" by staff which it said led to a fatal explosion at its largest US refinery.

The blast and subsequent fire at the refinery near Houston claimed 15 lives and injured 170.

Meanwhile, the firm has said it will continue with its share buyback strategy in the second half of the year, which it expects to be at least $6bn.

However, Lord Browne warned it was not certain that the second six months would be as profitable as the first half of 2005.

"The outlook for retail margins remains uncertain with continuing crude and product price volatility," he said.

"Rising product prices have dampened margins over the past few weeks and have contributed to a weak start to the third quarter."

BP's shares fell 2% to 629.5 pence as investors factored in the cost of the compensation pay-out.

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