Slick operation sees BP double profits for first quarter to £5bn

OIL major BP yesterday revealed it more than doubled profits during the first three months of the year to $5.6 billion (£3.6bn).

• BP's Aberdeen plant has helped the multinational beat city forecasts around its profits. Picture: Kate Barlow

The 135 per cent year-on-year rise was achieved after the price of crude oil was pushed higher by economic recovery hopes and market speculation.

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BP's performance was much stronger than City forecasts after core profits in exploration and production nearly doubled to $8.3bn.

While some consumer groups yesterday accused the firm of profiteering in the wake of average petrol prices hitting record highs, the spike is in comparison to the nadir of the recession in the first quarter of 2009, when crude prices averaged just over $41 a barrel. A year later, the average was closer to $76.

But despite its profit announcement, the continuing oil spill from a BP well in the Gulf of Mexico played on the firm's share price yesterday.

Keith Bowman, an analyst at Hargreaves Lansdown, said: "Progress has been driven by a near doubling in the oil price, a 3 per cent reduction in unit production costs, along with favourable accounting effects and a lower tax bill.

"On the downside, the accident in the Gulf of Mexico continues to overshadow, while refining remains challenging and group production levels flat."

In a recent strategy update, BP said it would begin production on 42 major projects worldwide over the next five years as existing fields decline. It also intended to boost profits by taking more costs out of the business.

In refining and marketing, where margins have been squeezed due to over capacity, first-quarter profits fell 33 per cent to $729 million, although the figure was higher than the previous three-month period.

The AA said that with around half of the UK's refineries up for sale and more production moving east, it was increasingly uneasy about the future for fuel provision, jobs, security of supply and pump prices in the UK.

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Its president, Edmund King, said: "We accept that, following the 2008 collapse of fuel prices, refiners had to revive profit margins to stay in business, but question whether the recent surge in the petrol wholesale price, from $680 in February to $800 now, has gone too far. Record petrol prices are due primarily to the weakness of the pound, fuel duty increases and lack of refining capacity.

"However, increased wholesale cost will have played its part in the more than 10 per cent cut in petrol consumption by UK drivers in recent months."

The oil slick resulting from the spill in the Gulf of Mexico covered an area 80 miles long by 42 miles wide yesterday afternoon.

At least five BP ships were attempting to collect crude as it spread towards the Louisiana coast. The firm has also mobilised two rigs to drill a relief well if needed, which could help redirect the oil. However, the work could take weeks to complete.