Oil price rebound helps BP top profit expectations for Q1

● But continuing payouts over 2010 Gulf of Mexico disaster see debt level increase

Oil giant BP saw first-quarter profits surge by 71 per cent as the recovery in oil prices helped it deliver its best quarterly result for three years.

At one point, shares hit their highest since 2010. The firm also hinted it may look at increasing its dividend this year after underlying profits increased to a better-than-forecast $2.6 billion (£1.9bn) for the first three months of 2018, up from $1.5bn.

Production rose 6 per cent in the first quarter compared with a year ago, and the firm highlighted investment in future growth, including announcements last month over the development of two new North Sea fields capable of producing up to 30,000 barrels of oil a day. Alligin, west of Shetland, and Vorlich – in the central North Sea – are expected to come on stream in 2020.

BP said its upstream operations, which cover exploration and production, enjoyed the best quarter since the third quarter of 2014, with underlying profits more than doubling to $3.2bn.

But the group continued to count the cost of its 2010 Deepwater Horizon tragedy in the Gulf of Mexico, with another $1.6bn spent in the first quarter. This included $1.2bn for the final payment of its 2012 settlement with the US department of justice.

During the quarter, BP completed another $200 million worth of divestments as it continues to sell off assets.

Bob Dudley, group chief executive at BP, praised “another strong set of results”.

He added: “Our safe and reliable operations and strong financial delivery have continued into 2018.”

Alasdair Ronald, Glasgowbased senior investment manager at Brewin Dolphin, said although the results were better than expected, analysts were slightly disappointed with lower cash generation partly due to the continuing Gulf of Mexico payments, which saw debt increase to $40bnfrom$38.6bnayearago.

He also said production in the second quarter will fall compared with the first because of factors including planned maintenance.

“The significance of this is that the company will not be able to take full advantage of the current surge in oil prices,” he pointed out.

The sector has been buoyed by rising oil prices, which hit nearly $76 a barrel on Monday.

Russ Mould, investment director at AJ Bell, said the market seems satisfied for now by BP’S assurances that it has passed the peak for outflows relating to the Gulf of Mexico disaster. “But if this is not in evidence later in the year, BP may be in for harsher treatment,” he said.

BP’S figures come after it last week named energy industry veteran Helge Lund as its next chairman, succeeding Carlhenric Svanberg.

Lund – who has previously headed BG Group and was a long-standing chief executive at Statoil – will join BP’S board as chairman-designate and a non-executive director on 1 September before taking on the role of chairman on 1 January next year.