Oil price rises lift BP profits

A REBOUND in oil prices and higher production helped BP nearly treble its first-quarter profit.

The oil giant was also boosted by costcutting as its underlying replacement cost profit, a key measure watched by analysts, soared to $1.51 billion (£1.17 billion) from $532 million last year.

The better-than-expected figures sent BP shares 7p higher to 449½p, but analysts raised concerns over the level of debt, up from £25 billion a year ago to £31.5 billion, which could squeeze dividend payouts.

Payments related to the Gulf of Mexico oil spill in 2010 are expected to reach between £3.8-4.6billion this year, with capital spending due to be £12.6-14.3billion.

Oil prices have jumped by more than 80 per cent from the start of last year, with Brent crude trading at close to $52-a-barrel. Earlier this year, BP raised the price at which it could balance its books to $60 after a string of investments which pushed up borrowing.

BP chief executive Bob Dudley, pictured, said: “Our year has started well. First-quarter earnings and cash flow were robust. It was another strong quarter for the downstream (marketing, refining and chemicals) and the first of our seven new upstream (exploration) 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.”

BP’s production rose by 5 per cent in the first quarter to 3.5 million barrels per day. It said projects now under construction are on average ahead of schedule and 15 per cent below budget and are expected to provide 800,000 barrels per day of new output by 2020. New projects span the likes of Egypt, the UK and Caribbean.

Michael Hewson, chief market analyst at CMC Markets UK, said the figures were “encouraging”, but added: “The overriding worry remains debt which continues to rise, and while BP has managed to return to profit that breakeven oil price may need to come down further, or the company will have to look at cutting the dividend.

Nicholas Hyett, equity analyst at investment firm, Hargreaves Lansdown, said: “If all goes to plan, the group should see rising production and increasing efficiencies improve its cash delivery. However, a stretched balance sheet means BP will have less and less resilience to deal with the unexpected.”