Oil giant BP has returned to profit in the first three months of the year thanks to rising oil prices and ongoing cost cutting efforts.
The group said it swung out of the red with replacement cost profits of $1.4 billion (£1.1bn) for the first quarter against losses of $485m a year earlier.
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A bounce back in oil prices saw Brent crude stand about 58 per cent higher than a year earlier in the first quarter, at $53.69 a barrel.
BP chief executive Bob Dudley said the year had “started well” for the group.
He added: “BP is focused on the disciplined delivery of our plans. First-quarter earnings and cash flow were robust.”
On an underlying basis, BP nearly trebled replacement cost profits to $1.5bn, from $532m a year earlier.
The better-than-expected figures came after the group saw a 5 per cent rise in production, boosted as the first of a raft of new projects came on stream.
Dudley said: “The first of our seven new upstream major projects has started up, with a further three near completion. We expect these to drive a material improvement in operating cash flow from the second half.”
The figures follow impressive earnings reports from US rivals ExxonMobil and Chevron last week as the industry benefits from a bounce back in crude prices, which had hit near 13-year lows early last year.
Royal Dutch Shell is also expected to post a leap in profits when it reports on Thursday.
First-quarter figures from BP come after it revealed last month it had slashed Dudley’s 2016 pay package by 40 per cent and cut his maximum earnings by $3.7m to see off a fresh shareholder rebellion.
Its annual report showed Dudley’s pay package was cut to $11.6m as the group looked to avoid a repeat of last year’s investor revolt, when almost 60 per cent of its shareholders voted against his 20 per cent pay hike.
BP’s upstream operations – which cover exploration and production – posted an underlying replacement cost profit of $1.4bn in the first quarter against a $747m loss a year ago, boosted by the surge in oil prices. Its downstream business, comprising refining and petrol stations, saw underlying profits edge lower to $1.7bn against $1.8bn a year ago.
The group has been slashing costs amid the recent prolonged oil price rout, as well as selling off unwanted businesses. It is set to offload up to $5.5bn of assets in 2017.
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Michael Hewson, chief market analyst at CMC Markets UK, said BP’s debt levels continued to cause concern, given that the group has said oil prices need to hit $60 a barrel for it to break even. BP itself has said that oil prices, which have eased off in recent weeks, are set to remain at about $50 to $55 a barrel this year.
Hewson said: “The overriding worry remains debt, which continues to rise – up to $38.6bn from $30bn a year ago – and while BP has managed to return to profit due to improving revenues, cost cutting and divestments, that break-even oil price may need to come down further, or the company will start to have to look at cutting the dividend.”