BP has announced an above-expectations surge in replacement cost profits of 23 per cent in its second quarter.
The oil giant, Europe's largest energy company, said its profits reached $6,118 million in the three months to June 2006 compared to $4,981 million during the same quarter in 2005.
The figures are based on BP's replacement cost profit, the standard method used by oil companies to report their results and which analysts say provides the best measure of a firm's underlying performance.
High spot prices for crude oil, which grew substantially during 2006's second quarter to an average of around $70 per barrel, were largely responsible for the profit boost, in spite of BP's production declining by two per cent during the period.
This slackening in output was balanced by improved refinery margins in a market which BP said was "generally stronger" than a year ago.
BP said that a slight increase in production at its Russian joint venture TNK-BP had seen net income generated by the plant rise to $645 million in the second quarter, compared to $641 million in the same period in 2005.
Meanwhile, the company expects its Thunder House platform, in the US Gulf of Mexico, to start production early in 2007. The project is over a year behind schedule, with BP's latest results marred by news of leaks at the platform.
"BP's second quarter result reflected good overall operating performance and continuing strong upstream and refining margins," commented BP's chief executive, Lord Browne.
"The Texas City refinery is now running at 200 million barrels per day and further units will be brought onstream across the balance of 2006."
Lord Browne warned that although "our actions to control costs are on track," higher tax charges would impact results but "strong cash generation" would continue to provide shareholders with dividends.
Despite the increase in profits, BP stressed that it had been forced to raise its capital expenditure plans as a result of rising costs.
Although BP's shareholders have benefited from high energy prices, caused primarily by instability in the Middle East, British businesses have paid the price with increased costs reducing their profits throughout 2006.
A report published last month by consultancy firm BDO Stoy Hayward showed that UK companies had faced an extra £11.1 billion in the last six months alone.
Press reports suggest that Lord Browne is preparing to stand down from his post in 2008, but the company has yet to announce his retirement.