6:49 AM, May 2, 2017 — British oil and gas production company BP (BP, BP.L) swung to a profit in the first quarter of the year, beating analysts’ estimates amid a recovery in oil prices and a higher rate of production.
Profit in the first quarter of the year was worth $1.45 billion, according to results published by the company on Tuesday. This compared to a loss of $583 million in the corresponding quarter of the prior-year and exceeded the mean estimate of analysts polled by Capital IQ for $1.26 billion. Underlying replacement cost profit, which is adjusted for non-recurring items, was $1.51 billion, surpassing analysts’ estimates for $1.23 billion and up from $532 million in the prior-year period.
Sales and other operating revenue totaled $55.86 billion, which missed analysts’ estimates for $59.87 billion but nevertheless marked a year-on-year increase from the $38.51 billion which was registered in the same quarter in 2016. Oil and gas production was 5% higher than a year earlier, the company said.
Continued curbs on spending also contributed to the profit improvement; the company has been cutting costs and selling assets since the Deepwater Horizon disaster, which killed 11 people in 2010 and caused an oil spill in the Gulf of Mexico.
The results were also supported by rising commodity prices. Crude oil prices have been in recovery mode since major oil producing nations, including members of the Organisation of Petroleum Exporting Countries (OPEC), agreed to cut production for six months starting in January 2016, in an effort to stabilize prices. At the end of the first quarter Brent crude, the international oil benchmark, was trading around $52.83 per barrel compared with $39.60 per barrel a year earlier.
BP’s organic capital expenditure was $3.5 billion in the first quarter, compared with $4.5 billion for the same period in 2016. It said that it expects payments related to the Gulf of Mexico oil spill to total $4.5 to $5.5 billion in 2017, before falling to about $2 billion in 2018. It made $2.3 billion in payments in the first quarter.
“BP is focused on the disciplined delivery of our plans,” Bob Dudley, group chief executive of BP, said in Tuesday’s results statement. “First quarter earnings and cash flow were robust. We have shown continued operational momentum, it was another strong quarter for the downstream and the first of our seven new upstream major projects has started up, with a further three near completion.”
He said that the new production projects are expected to drive “a material improvement in operating cash flow from the second half.”
Companies: BP p.l.c.
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