BP’s profit triples on higher oil prices and production
london — BP’s profit nearly tripled in the first quarter of 2017 from a year earlier, buoyed by rising oil prices and production that hit a five-year high, while debt piled up in order to pay for acquisitions and costs for the 2010 Gulf of Mexico spill.
The British oil and gas company joined oil major rivals including Exxon Mobil, Chevron and Total in posting stronger-than-expected quarterly earnings, mostly thanks to higher oil and gas prices.
Oil prices rose by 50 per cent in the past year to around $54 a barrel in the first quarter.
BP expects prices to average between $50 and $55 a barrel in 2017, heading to the higher end of the range if Opec and major producing countries extend production cuts into the second half of the year, chief financial officer Brian Gilvary told Reuters.
BP’s shares were trading 2.4 per cent higher at 0721 GMT, the biggest winner on London’s bluechip FTSE 100 index.
“The results are positive,” Cenkos Securities analysts wrote, but adding that “gearing is creeping up towards the max of the 20-30 per cent target range, although divestments, including the recent $1.7 billion SECCO sale in China, should help.”
Net debt rose 9 per cent in the quarter to $38.6 billion, lifting BP’s gearing of net debt to shareholders’ equity from 26 per cent to 28 per cent, closer to its ceiling of 30 per cent.
BP’s operating cash flow in the quarter rose to $2.1 billion from $1.9 billion a year earlier, hit by payments made towards settling fines related to the 2010 deadly Deepwater Horizon rig explosion and oil spill in the Gulf of Mexico.
BP took a pre-tax $917 million charge in the first quarter related to the spill, as total charges are expected to reach $4.5 billion to $5.5 billion this year.
BP reported first-quarter underlying replacement cost profit, the company’s definition of net income, of $1.51 billion, exceeding analysts’ average forecast of $1.26 billion.