BP\u00a0reported the biggest-ever quarterly profit for a British company but warned of the risks of doing business in Russia and promised to fight to defend its interests there.<\/p>\n
Soaring oil and gas prices helped push underlying net profit up 56 per cent to $8.6bn (\u00a34.3bn) in the second quarter.<\/p>\n
Tony Hayward, the chief executive who took over last year, has been trying to turn the company round after years of disappointing performance and yesterday\u2019s figures showed signs that his efforts may be bearing fruit.<\/p>\n
However, BP\u2019s shares have been under pressure because of its problems in Russia. The group is facing a bitter battle for control of TNK-BP, its joint venture owned 50-50 with the\u00e2\u20ac\u2030Alfa-Access-Renova group of Russian billionaires.<\/p>\n
The shares slipped again yesterday, in spite of the better-than-expected results, and closed down 12\u00bep at 506\u00bep.<\/p>\n
Mr Hayward said BP would \u201cdefend robustly\u201d its rights under the shareholder agreement setting up TNK-BP and threatened legal action against AAR.<\/p>\n
He advised other international companies looking to do business in Russia to \u201ctread with caution\u201d, reinforcing BP\u2019s message that the pressure on TNK-BP from AAR and Russian authorities would damage the confidence of international investors.<\/p>\n
Mr Hayward also said Robert Dudley, chief executive of TNK-BP, could remain at the head of the company while outside Russia only for a matter of months.<\/p>\n
Mr Dudley left Moscow last week following AAR\u2019s sustained campaign to remove him.<\/p>\n
He is still running TNK-BP from an office somewhere in central Europe but Mr Hayward\u2019s comments showed that unless Mr Dudley returns to Russia fairly soon, BP will be forced to bow to AAR\u2019s demand that he be replaced.<\/p>\n
BP\u2019s quarterly profit will remain the UK\u2019s biggest ever if, as expected, Royal Dutch Shell reports an underlying net profit of about $8.3bn tomorrow.<\/p>\n
Production for the second quarter at BP was broadly flat compared with the same period in 2007 \u2014 at 3.83m barrels of oil equivalent per day. However, excluding the effect of production sharing contracts, which give more oil to the countries where BP operates as the price rises, underlying production was up 6 per cent.<\/p>\n
Profits at the refining division collapsed from $2.7bn to $539m as margins were squeezed, especially in the US.<\/p>\n
Vivienne Cox, the head of BP\u2019s alternative energy business, including biofuels, wind and solar, said BP had talked to possible strategic partners about taking a stake and was reviewing options to \u201cexpose the value\u201d of the unit, but had \u201cno plans\u201d to float it off.<\/p>\n
BP said it would pay a dividend of 14 cents a share for the quarter, up 29 per cent from the 10.825 cents paid in the equivalent period of 2007. It has shifted away from share buy-backs and towards dividends as a way to distribute cash.<\/p>\n
Colin Smith, analyst at Dresdner Kleinwort, said BP had a superior short-term growth outlook than Shell.<\/p>\n
\u201cThe bears would say BP is not investing as much for the future, but it does not necessarily need to. BP is doing well right now.\u201d<\/p>\n