- guardian.co.uk, Tuesday 28 July 2009 14.52 BST
BP: reported second-quarter profits of $3.14bn. Photograph: Gareth Fuller/PA
Profits have more than halved at BP, the company said today, as it continued to suffer from a weak oil price and falling demand for energy.
BP reported profits of $3.14bn (£1.9bn) for the three months to the end of June, 53% less than for the same period last year.
The results beat City expectations and were 30% up on profits in the first three months of this year.
Chief executive Tony Hayward insisted BP was performing well despite the drop in profitability.
"We are in turbulent times, volatile and uncertain. But we continue to steer a steady course through choppy waters," said Hayward.
He revealed BP had already hit its target of cutting costs by $2bn this year, and pledged to slash another $1bn off costs before the end of 2009. The company is already reducing its headcount by around 5,000 this year, but said today that no further cuts are planned.
"This is about deflation across the industry and lower costs in the supply chain, which we're working to bring into our own costs," said a spokesman.
Cutting costs will enable the company to maintain its dividend at 14 cents a share. The fall in the value of the pound in the last year means this is a 21% rise when measured in sterling – 8.5p per share compared with just over 7p a year ago.
A year ago, BP was celebrating as the oil price headed towards a record of nearly $150 a barrel. Over the last three months a barrel of US crude has been changing hands for less than $60. That forced down profits at BP's exploration and production arm to $5.1bn from $10.8bn a year ago.
Some of BP's rivals have suffered production problems in recent months but BP cheered investors by reporting it produced an additional 4m barrels during the last three months.
The recession has meant less demand for energy, with some factories closing or being mothballed. BP said it had suffered "significant falls" in demand 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," Hayward warned.
Analysts were encouraged by BP's performance. Gordon Gray of Collins Stewart said the company was making "considerable progress" in its operational recovery under Hayward, who took over two years ago.
But Peter Hitchens of Panmure Gordon fears that BP is under threat from further falls in the oil price.
"BP is doing a better job than most, but I have concerns about the operating environment," said Hitchens, who believes the current oil price of almost $70 a barrel is not sustainable.
"The oil price will come back, and that will put pressure [on BP and Shell]," Hitchens said.
Shares in BP had slipped 1.7% by 2pm to 510.5p.
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