BP Reports `Significant Bounceback' in U.S. Refining, Marketing Operations

BP Plc reported a “significant bounceback” in its U.S. refining and marketing operations in the second quarter because of cost-cutting and higher margins.

BP made about $300 million from its trading operations in the three months ending June, Iain Conn, the company’s head of refining and marketing, said in a presentation on BP’s website.

The company posted a profit before tax and interest of $2.1 billion from refining and marketing, up from $680 million in the year-earlier period, BP said in an earnings statement earlier this week. “This is the strongest absolute profit since the second quarter of 2006” when refining margins were about $13 a barrel, compared with about $5 a barrel now, Conn said.

BP is seeking to improve profitability in its refining and marketing business by an annual $2 billion to $2.5 billion in the next two or three years, he said.

The oil company had an “underlying improvement” of about $500 million by mid-2010 from the end of last year after cutting costs and “margin capture,” Conn said.

“We are now beating the competition, we are no longer catching up,” Conn said. Trading had a “normal quarter,” he said.

BP cut its refining and margin operation breakeven level “to well below” $5 a barrel in the first half from $5.70 in 2009, based on BP’s Global Indicator Margin, Conn said.

Tremendous Signal

Its U.S. refining and marketing operations are “now strongly back in profit and we are seeing a significant bounceback in the value chain performance, and I think this is a tremendous signal for the future,” Conn said.

Global refining margins, or the profit from turning crude oil into fuels, rose to an average of $5.49 a barrel in the second quarter, the highest in more than a year, according to BP data.

The company had expected refining margins to average $3 to $6 a barrel in 2010 and beyond, Conn forecast in April.

Royal Dutch Shell Plc reported a loss of about $100 million from refining in the period, Chief Financial Officer Simon Henry said yesterday. “Trading had a relatively quiet quarter” on low oil price volatility, he said.

To contact the reporters on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net;

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