Oil Major BP ups cost cut target as profits dive

Oil giant BP Plc said it had increased its cost reduction targets for 2009 by 50 percent to $3 billion, as it reported a halving in second quarter profits due to lower oil prices and weaker refining margins.

Europe's second largest oil company by market value said on Tuesday it had achieved its original 2009 target of $2 billion in cuts in the first half of the year, confounding analysts who predicted the industry would be unable to roll back the big cost rises of recent years.

"We will continue to push efficiencies into the group and make sure every dollar counts," Chief Executive Tony Hayward said in a statement.

Oil companies are reacting to the collapse in oil prices from a high above $147/barrel in July last year to around $70/bbl now by slashing exploration, production and refining costs, which doubled since 2004.

BP said replacement cost (RC) net profit, which strips out unrealised gains or losses related to changes in the value of inventories, was $3.14 billion in the second quarter.

Excluding one-off items RC net profit was $2.94 billion, ahead of an average forecast of $2.81 billion, from a Reuters poll of eight analysts.

Dealers predicted BP shares would open 2 percent higher on the news.

BP said production of oil and gas rose 4 percent in the quarter compared to the same period of 2008, to 4.0 million barrels of oil equivalent per day, as new fields ramped up.

BP is the first of the top tier of Western oil companies , known as the five Supermajors, to report their second quarter results.