BP faces a war on two fronts

At $3.64bn (£2.15bn), the group's underlying replacement cost (URC) profits for the second quarter were up by a third on the corresponding period in 2013, and significantly in advance of the $3.23bn generated in the preceding quarter. The rise in profitability was underpinned by an increased proportion of higher-margin products in BP's product mix, together with higher realised prices for the group's liquids and gas. Ironically, the result was also helped by better than expected income receipts from BP's holding in Russian state-controlled energy giant Rosneft.

BP secured a near 20 per cent stake in Rosneft after it unloaded its half share in the benighted TNK-BP joint venture last year. History suggests it's never advisable to open up a second front in Russia. But BP now finds itself exposed to the gathering political fallout from Ukraine, in addition to ongoing litigation linked to 2010's Gulf of Mexico oil spill.

The potential problems surrounding BP's relationship with Rosneft were exacerbated earlier this week when an international tribunal in The Hague ordered Russia to pay $50bn in compensation to former shareholders of the now defunct Yukos oil company. The fear is that BP could be caught in the crossfire in a trade war involving Russia, the European Union and the US.

Politics aside, BP can certainly claim progress on the operational front. A step up in performance from BP's remaining Gulf of Mexico assets helped boost production (excluding Russia) by 3 per cent year on year. However, in common with many of its industry rivals, BP's downstream segment continued to be hampered by weak refining margins, leading to a 27 per cent fall in URC profits from the first quarter.

JPMorgan Cazenove anticipates adjusted EPS of $0.86 for 2014.