Underlying replacement cost profit for the quarter fell to $720m (£550m), down 44% from $1.3bn a year earlier.

BP also said it had "drawn a line" under its liabilities from the 2010 Deepwater Horizon disaster.

Earlier this month, the energy giant that the final bill for the disaster in the Gulf of Mexico would be $61.6bn.

In April 2010, the Deepwater Horizon drilling rig exploded in the Gulf of Mexico, killing 11 workers and causing an oil spill that became the worst environmental disaster in US history.

BP said it had taken a further charge of $5.2bn in the quarter to cover liabilities from the disaster. Including these charges and other items, BP reported a $2.2bn loss on a non-underlying replacement cost basis, compared with a $6.6bn loss a year earlier.

The company also announced another cut to its planned investment budget for 2016 to "below $17bn".

'Challenging' environment

BP chief executive Bob Dudley said: "Compared with a year earlier, the underlying second-quarter result was impacted by lower oil and gas prices and significantly lower refining margins, but this was partly offset by the benefit of lower cash costs throughout the group as well as lower exploration write-offs."

He added that the company expected "the external environment to remain challenging", but added that "we are delivering significant improvements to the business that will stick at any oil price".

On Monday, oil prices dropped to a three-month low, hit by rising concerns that a global oversupply of both crude and natural gas will dampen prices.

US crude fell to $43.11 a barrel, its lowest level since April, while Brent crude dropped to $44.75.

BP chief financial officer Brian Gilvary said: "We continue to reset our capital and cost base and are moving steadily towards our aim of rebalancing organic sources and uses of cash by 2017 in a $50-55 per barrel oil price range."

Richard Hunter, head of research at Wilson King Investment Management, said: "The sigh of relief emanating from BP HQ is almost palpable as the Gulf of Mexico spill is finally consigned to the history books.

"This is not to say that the challenges are over, not least of which is an underlying oil price still markedly short of the level which would provide comfort for the company."

BP's second-quarter profit was slightly below analysts' expectations, and in early trading the company's shares were down 1.8%.

(BBC)