BP's new Chief Executive Tony Hayward pledged to turn around Europe's second-largest fully-listed oil company on Tuesday as a drop in second-quarter profits highlighted its industry-lagging performance.
Hayward, who took over in May after his predecessor John Browne stepped down following revelations about his private life, promised to streamline the company but declined to give a timetable for its recovery.
"BP's current operating performance is not good enough ... rather than make optimistic predictions, I'd prefer to concentrate on real delivery," Hayward told a press conference.
The London-based company said second quarter replacement cost net profit, which strips out changes in the value of inventories, fell 1% to $6.09 billion, due to lower production and refinery outages, problems Hayward promised to address.
Excluding a $741 million one-off gain from the sale of oil fields and a U.K. refinery, underlying profits fell 12.5% at BP.
However, a lower-than-expected tax rate, and slightly better-than-forecast production meant the result was not as bad as predicted, while some investors were relieved growth targets were not cut again.
"The challenges may not be over but at least the rot seems to have been stopped," said Richard Hunter, Head of U.K. Equities at Hargreaves Lansdown Stockbrokers.
BP , the third-largest non-government controlled oil company in the world by market value, said oil and gas production fell 5% to 3.804 million barrels of oil equivalent per day (bpd) in the second quarter compared to the same period last year.
BP suffered a series of operational problems in the past two years including the delayed start-up of major projects, oil spills and a refinery explosion which killed 15 workers.
Hayward said he planned to boost technical skills by investing more in training and hiring more engineers.
He said a shortfall in technical skills, and over-reliance on outside contractors were to blame for delays to one of the company's biggest projects, the Thunder Horse platform in the Gulf of Mexico.
Hayward wants to expand output but his job is made difficult by a growing trend for governments from Venezuela to Russia to reserve the richest oil and gas fields for their national oil companies rather than offer them to western oil firms.
His aim to boost profits will also be tested by industry cost inflation -- currently running at 10% -- and investment in improving safety following the refining blast and oil spills.
Outages at U.S. refineries meant BP's crude processing business operated at only 83% capacity -- just as margins rose strongly. Rivals such as Exxon Mobil regularly achieve utilization rates above 90%.
Excluding the one-off gains, BP's replacement cost profit, was $5.346 billion, ahead of an average forecast of $4.975 billion in a Reuters poll of 10 analysts.
BP's shares fell 1.66% to 591-1/2 pence, compared to a 1.56% drop in the DJ Stoxx European oil and gas sector index.
BP's shares have risen only 4% since the beginning of the year compared to a rise of more than 9% in the sector index.