BP demonstrates strength of strategy after Q1 results

BP demonstrates strength of strategy after Q1 results

/ Financial News / Friday, 03 May 2019 09:54

British energy giant BP said that first-quarter net profits jumped by almost a fifth, as rising production and lower costs eclipsed the impact of weaker oil and gas prices.

Profit after tax rallied 19 percent to $2.9 billion (2.6 billion euros) in the three months to the end of March, BP said in a results statement. That compared with $2.5 billion during the same period last year.

Energy production rose about 2.4 percent to 3.8 million barrels of oil equivalent per day.

Output was lifted by last year's vast purchase of US shale oil and gas operations from mining titan BHP, as well as new projects in Egypt, Trinidad and Tobago and the Gulf of Mexico.

However, underlying replacement cost profit - a widely-watched measure which excludes fluctuations in the value of crude oil inventories - slid eight percent to $2.4 billion, although slightly above analysts' forecasts.

In the first quarter, BP paid another $600 million for costs arising from the 2010 Gulf of Mexico oil spill catastrophe, but that was sharply lower than the $1.6 billion spent a year earlier.

‘Volatile period’

Despite the weak market conditions, chief executive Bob Dudley said BP had enjoyed “solid” performances in both its downstream operations - which comprises refining, marketing and distribution - and upstream activities that cover exploration and production.

“BP's performance this quarter demonstrates the strength of our strategy,” said Dudley in the statement. “With solid upstream and downstream delivery and strong trading results, we produced resilient earnings and cash flow through a volatile period that began with weak market conditions and included significant turnarounds. […] Moving through the year, we will keep our focus on disciplined growth, with efficient project execution and safe and reliable operations,” Dudley added.

BP is in the midst of selling $10 billion of assets to finance the $10.4-billion BHP transaction. The group sold $600 million of assets in the first quarter.

In late morning deals, BP shares rose 0.49 percent to 555.20 pence, bucking the downwards trend on the London stock market.

“BP may not have repeated its immense performance from the full year numbers in February, but nonetheless remains on track to deliver on its strategic promises,” said Interactive Investor analyst Richard Hunter.

The company's annual profits surged in 2018 as oil prices soared over most of the year.

However, Brent oil prices then tumbled to an 18-month low in late December after producers’ cartel OPEC and non-OPEC members agreed to trim output, sending shockwaves through the energy sector.

Brent crude averaged $63.13 per barrel in the first quarter of this year. That was down from an average of $66.82 in the same portion of 2018.

BP meanwhile continues to be hit hard by heavy financial costs linked to the 2010 deadly explosion on a BP-leased drilling rig called Deepwater Horizon that unleashed the worst environmental disaster in US history.

BP's total bill so far for the Gulf of Mexico catastrophe is about $70 billion.

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