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BP plc Boosted By Increased Profit

bpThe share price of BP (LSE: BP) (NYSE: BP.US)  is currently up 0.5%, on the morning that the oil giant released its second quarter results for 2014.

Underlying replacement cost profit (ie, adjusted for non-operating items and fair value accounting effects) for the quarter was £3.6bn, which is up 34% on the same quarter last year, and up 13% on the first quarter of this year.

Operating cash flow of $7.9bn for the quarter was boosted by increasing oil and gas production from both new and recently-started higher-margin upstream projects and by increased processing of heavy crude oil by the company’s newly modernised Whiting refinery.

Upstream operations reported $4.7bn of underlying pre-tax replacement cost profit, up 9.3% on the same period last year and up 6.8% on the first quarter of 2014. The gain came from higher production in key regions and higher oil and gas realisations, but with some offset due to the effect of divestments and higher non-cash costs. 

BP’s stake in Rosneft netted it $1bn in underlying net income for the quarter, with a dividend of $700m having been received earlier this month.   

The downstream business saw underlying pre-tax replacement cost profit fall to $0.7 billion, down 41% on the same quarter last year, and down 30% on the first quarter of this year. The fall was attributed to a combination of a “significantly weaker refining environment” and a smaller contribution from supply and trading, although there was some uplift from an increase in heavy crude runs at the Whiting refinery. 

The company also reported that it had agreed sales worth a total of $3.4bn, as part of an expected $10bn of divestments by the end of 2015. BP says it plans to use the proceeds mainly for return of value to shareholders, most likely via share buy-backs.

News regarding after-effects of the Gulf of Mexico disaster was limited to the announcement that provision for litigation had been increased by $260 million, with the running pre-tax charge for the incident now standing at $43 billion.

A dividend of 9.75 cents for the quarter has been recommended — the same as in the first quarter, but an 8.3% increase on the second quarter last year. 

Commenting on the results, group CEO Bob Dudley said

This was another successful quarter, delivering both operational progress and robust cash flow. We are continuing to ramp up the major new projects that drive delivery of cash flow and are also now seeing benefits from our focus on operating with greater reliability and efficiency

“This operational momentum keeps us well on track to meet our 2014 targets and underpins our longer-term commitment to grow distributions to our shareholders.

At 499p, BPs share price is up almost 2.3% so far in 2014, versus a FTSE 100 that’s gained less than 0.6%. But the impact of the Deepwater Horizon disaster is still being felt, with BP’s share price still down 22% on its pre-spill level, during which time the FTSE 100 has risen 17.5%.

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Jon Wallis owns shares of BP. The Motley Fool has no position in any of the shares mentioned.