BP gets Q1 boost from higher oil prices and more production

Virginia Carson
May 2, 2018

British Petroleum saw a 71 percent jump in its profits for the first quarter Tuesday, benefiting from the rise in oil and gas prices and increased production.

Gearing, the ratio of net debt to equity, was 28 percent, an increase from 27 percent in the fourth quarter of 2017, BP said. The figure, which excludes fluctuations in the value of inventories and one-time items, is the industry's preferred gauge of earnings.

A almost 25 percent rise in oil prices over the past year has lifted revenue for oil companies as investors shift their focus to how much cash the firms can generate following years of deep cost cuts.

The upstream result was BP's best since the third quarter of 2014.

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The FTSE 100-listed firm produced some 3.7mln barrels of crude per day in the three month period, up 6% from the comparative period of 2017.

But the group continued to count the cost of its 2010 Deepwater Horizon tragedy in the Gulf of Mexico, with another $1.6bn (£1.2bn) forked out in the first quarter - including $1.2bn (£873m) for the final payment of its 2012 settlement with the Department of Justice.

Continued Downstream earnings growth with strong refining availability in the US. Stripping those out, cash flow reached $7 billion in the quarter, the strongest since 2014.

Still, what investors are watching most closely is cash flow, as this is what pays the bills in oil and gas, not net profits that some observers have aptly noted can be adjusted to suit the reporting company's needs.

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BP's results follow a mixed picture from the sector with Royal Dutch Shell RDSa.L and Exxon Mobil XOM.N falling short of forecasts while results from Chevron CVX.N and France's Total TOTF.PA were stronger than expected.

"Moving through 2018, we're determined to keep delivering our operational targets and maintaining capital discipline while growing cash flow and returns", chief executive Bob Dudley said in a statement.

Dividend unchanged at 10 cents per share.

Chief financial officer Brian Gilvary cautioned that the performance was energised only partly by the oil price recovery. Payments are expected to be just over $3 billion in 2018, weighted to the first half of the year.

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The further hit from the spill in the first quarter sent the firm's debt levels rising to 40 billion United States dollars (£29 billion) from 38.6 billion U.S. dollars (£28.2 billion) a year ago.

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