updated 7/26/2005 8:22:46 AM ET 2005-07-26T12:22:46

BP Group PLC, one of the world's largest oil companies, announced Tuesday that quarterly profits rose 29 percent on the strength of world oil prices, but said it was taking a $700 million charge to settle claims from a refinery explosion.

Net profit came to $5.66 billion for the three months ending June 30, up from $4.38 billion in the second quarter of 2004. Revenue jumped to $88 billion from $71.1 billion.

BP is the first major oil company to report its second-quarter results, before Royal Dutch Shell PLC and Exxon Mobil Corp., both expected to post strong earnings Thursday because of oil prices that remain near record highs.

BP Chief Executive John Browne said that North Sea Brent crude averaged $51.63 a barrel in the quarter, around $4 per barrel higher than in the first quarter.

"Our record first-half financial results could not have been delivered without the significant investments made over the last decade," said Browne. "These are capturing the benefit of the strong trading environment."

The company had one-time items of $826 million, including the $700 million figure for settling claims arising from the Texas City, Texas, refinery explosion on March 23 that killed 15 workers.

BP said its replacement cost profit for the quarter, considered a key indicator by analysts, was $5.81 billion, up from $4.07 billion for the same period last year.

However, Browne warned it was not certain that the second six months would be as profitable as the first half of 2005.

"The outlook for retail margins remains uncertain with continuing crude and product price volatility," he said. "Rising product prices have dampened margins over the past few weeks and have contributed to a weak start to the third quarter."

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