BP Profits Disappoint Despite Oil Price Jump

BP's profits for the second quarter of 2011 disappointed Tuesday after cuts in production stemming from last year's Deepwater Horizon accident.

BP sign seen in Jackson, Missouri.
Getty Images
BP sign seen in Jackson, Missouri.

Profits of $5.6 billion for the second quarter of 2011 were up by 13 percent over the same period last year. The jump happened amid record oil prices, however.

Oil and gas production in the second quarter were down 11 percent from the same time in 2010, to 3.43 million barrels of oil equivalent per day.

Part of the drop in production came about because the company had to sell off some oil fields in order to pay for the cost of the U.S. spill.

Investors hope that chief executive Bob Dudley, who took over from Tony Hayward in the wake of the Gulf of Mexico disaster, will outline his plans for the future of the company.

Some analysts have speculated that BP could break itself up, similar to the way ConocoPhillips and Marathon Oil have done.

There have also been further problems with the company's Russian subsidiary.

Its Russian partners in the TNK-BP joint venture scuppered a proposed link between the company and state-owned Rosneft.

"We expect the momentum of our recovery to build into 2012 and 2013 as new projects come on stream, particularly in higher-margin areas; as we complete current turnaround activity; as we return to work in the Gulf of Mexico; and as uncertainties reduce," Dudley said in a statement.

"At the same time we will increasingly focus both our portfolio and our investments on long-term value growth."

During this time last year, the company made a $17.15 billion loss after a pre-tax charge of $32 billion to cover costs relating to the Gulf of Mexico oil spill.

"These are a disappointing set of results," Peter Hutton, analyst at RBC Capital Markets, told CNBC Tuesday.

"Russia was a bit quick and India is going to take some time to come through."

BP recently paid Reliance Industries £4.4 billion for a 30 per cent stake in 23 offshore oil and gas projects in India.

The company should consider selling off its refining and marketing arm to focus on its core business, Hutton added.

"The management needs to focus on how it can liberate the strong value that we see."