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UPDATE 2-BP profit outstrips forecasts, lifted by higher oil output

Ron Bousso

* BP reports Q2 profits of $2.8 bln, beating expectations

* Strong oil and gas production growth offset weaker prices

* BP has no plans to take its own tankers through Hormuz (Updates throughout, adds shares, graphic)

LONDON, July 30 (Reuters) - A strong increase in oil and gas production helped BP offset weaker crude prices and refining profit to beat second quarter profit expectations on Tuesday, lifting its shares.

BP's result contrasts with Total and Norway's Equinor, which both reported sharp earning drops, and builds on a steady recovery following deep cost cuts since the 2014 downturn, project start-ups and last year's $10.5 billion acquisition of BHP's U.S. shale assets.

Shares in BP were up 3.2% at 0748 GMT, compared with a 0.2% gain in the broader FTSE index.

"At the midpoint of our five-year plan, BP is right on target," Chief Executive Officer Bob Dudley said in a statement.

BP's underlying replacement cost profit, the company's definition of net income, reached $2.8 billion in the second quarter, exceeding a company-provided forecast of $2.46 billion.

The second quarter profit was up from $2.4 billion in the previous quarter.

The results beat expectations for ten quarters in a row, analysts at Bernstein said.

"Strong volume growth from accretive barrels and seamless execution remains underappreciated," Bernstein which has an "outperform" recommendation on the stock.

The company's operating cash flow recovered to $6.8 billion in the quarter from $5.3 billion in the previous quarter as a result of a one-off working capital release.

HIGHER PRODUCTION

Second-quarter production rose to 3.8 million barrels of oil equivalent per day, 4% higher than a year earlier.

BP said it expects third-quarter 2019 reported production to be lower than second-quarter, reflecting maintenance activities as well as the impact of Hurricane Barry on operations in the U.S. Gulf of Mexico.

Benchmark Brent crude oil prices in the second quarter averaged around $69 a barrel, up from $63 the previous quarter but down from $74 a barrel a year earlier, BP said.

In the refining and marketing segment, known as downstream, profits dropped due to lower sales and refinery throughput as plants underwent maintenance ahead of a major change in marine fuel standards in 2020.

Global growth in oil demand slowed in the first half of the year to around 1 million barrels per day but has slightly recovered in the second half, BP's Chief Financial Officer Brian Gilvary told Reuters.

Despite the higher profit, BP's debts rose in the first half of the year to $46.5 billion from $38.7 billion the previous year, mostly as a result of the BHP acquisition.

Gearing, the ratio between debt and BP's market value, rose to 31% compared with 27.5%.

BP rival Royal Dutch Shell is due to report results on Thursday, while Exxon Mobil and Chevron are both scheduled for Friday.

(Additional reporting by Noor Zainab Hussain in Bengaluru Editing by Saumyadeb Chakrabarty and Alexander Smith)