Lower oil price takes toll on BP but result still pleases

Energy major BP has seen profits take a tumble in the first quarter after it was hit by falling oil and gas prices.

Strong supply over the three months also partially offset the impact of lower prices and weaker refining margins. Picture: Contributed

The oil giant said underlying replacement cost profit – the market’s preferred measure – fell to $2.4 billion (£1.9bn) in the first quarter, dropping from $2.6bn in the same period last year.

But the profits were slightly ahead of analysts’ forecasts due to strong trading across both oil and gas.

Strong supply over the three months to March also partially offset the impact of lower prices and weaker refining margins, the company said.

Group chief executive Bob Dudley said: “BP’s performance this quarter demonstrates the strength of our strategy.

“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.”

The FTSE 100 stalwart, which remains a key North Sea player, has been riding the wave of a rebound in the cost of crude in recent years, as it doubled profits for the 2018 full-year.

However, the price of Brent crude oil sank to an 18-month low at the end of December, holding back profits in the sector. The company also took operational control of BHP oil assets scattered across the US during the quarter, following its $10.5bn acquisition.

Operating cash flow for the period stood at $5.9bn, excluding a $600 million payment for its Deepwater Horizon oil spill in the Gulf of Mexico in 2010, and a $1bn working capital build.

David Barclay, head of office at Brewin Dolphin Aberdeen, said: “It’s a mixed set of results from BP, but they are largely in line with investor expectations for a challenging first quarter.

“Average production levels increased to 3.8 million barrels per day of oil equivalent, driven by major new projects coming onstream and the integration of BHP Billiton’s US shale assets.

“A weaker oil price environment at the beginning of the year saw profits slip, but with production levels expected to remain flat a firmer oil price backdrop should ensure a more resilient second quarter.

“[There are] $10bn of asset sales planned over the next two years. Income investors will be pleased to see the first-quarter dividend payment rise to 10.25 cents per share, an increase of 2.5 per cent on the same time last year.”