LONDON (Alliance News) - Oil major BP PLC on Tuesday echoed peer Royal Dutch Shell PLC in reporting a sharp increase in profit for the first quarter on strong Upstream performance as it looks to move on from the Deepwater Horizon oil spill which has dominated the company's operations over the past eight years.
BP's underlying replacement cost profit for the three months to March was USD2.59 billion, well above the comparative year ago figure of USD1.51 billion. It was also higher than the USD2.11 billion posted in the final quarter of 2017 and company-compiled market consensus of USD2.20 billion.
On a reported basis, RC profit was USD2.39 billion, up from USD1.41 billion a year ago. In the final quarter of 2017, the company posted a loss on reported basis of USD583.0 million.
The company has joined fellow blue chip oil firm Shell in posting significantly higher first quarter earning.
Shell, London's largest listed company by market capitalisation, on Thursday last week reported a 41% year-on-year increase in first quarter current cost of supply earnings to USD5.44 billion, likewise benefiting from an increased oil price.
The price of Brent oil was quoted at USD74.05 a barrel midday Tuesday, having hit over USD75.00 barrel late Monday, its highest level since late 2014.
BP's operating cashflow, excluding Deepwater Horizon payments, was USD5.4 billion compared to USD4.4 billion a year prior. Including the spill payments, operating cashflow was USD3.6 billion compared to USD2.1 billion the year before.
BP's organic capital expenditure for the first quarter was USD3.5 billion, flat year-on-year. It expects annual capex to be between USD15.00 billion and USD16.00 billion.
Looking at BP's balance sheet, net debt at the end of March stood at USD40.0 billion, compared to USD38.6 billion a year earlier. Gearing at the same date was 28.1% in comparison to 27.4% at December's end and 28.0% a year prior.
First quarter proceeds from divestment came in at USD200.0 million. For 2018, BP expects total divestment proceeds of between USD2.00 billion and USD3.00 billion.
BP attributed the higher gearing to increases in working capital and increased Deepwater Horizon oil spill payments, the legacy of which continues to impact the business. The firm is continuing, it said, to target gearing between 20% and 30%.
Gulf of Mexico oil spills payments in the period totalled USD1.6 billion on a pretax basis, including USD1.2 billion as a final payment related to the 2012 US Department of Justice settlement.
In 2017, the company paid out USD5.2 billion relating to the spill and expects to pay just over USD3.00 billion during 2018, weighted towards the first half. Earlier this year, it had said it believed settlements would soon begin to wind down.
BP has paid out some USD65.97 billion since the April 2010 disaster.
BP's group production increased 5.7% year-on-year to 3.7 million barrels of oil equivalent per day. This is a significant improvement on Shell's first quarter production, which increased 2% to 3.84 million barrels of oil equivalent per day.
The company is paying a quarterly dividend of 10 US cents, unchanged from the last quarter of 2017. During the first quarter, it returned USD120.0 million to shareholders through the buyback of 18 million shares.
This strong overall group performance in the period, BP said, was mainly due to strong profit growth in its Upstream business, offset by higher taxes.
Underlying RC profit before interest and taxes in Upstream was USD3.16 billion, well over double the USD1.37 billion in recorded a year prior. This, BP said, reflected higher liquids and gas realisations, increased production, and better gas marketing and trading.
The division's production for the quarter was 2.6 million barrels of oil equivalent per day, up 9.1% on the same period a year before excluding Rosneft. The division benefited from the start of production at the Atoll Phase One project in Egypt, with another six major projects expected to come online in 2018.
Second quarter production is expected to be lower than the first due to the expiration of its Abu Dhabi offshore concession and seasonal maintenance work.
Shell had also benefited from increased Upstream profit, with its figure nearly tripling to USD1.55 billion from USD540.0 million with earnings aided by higher prices despite a decline in volume.
BP's downstream underlying RC profit before income and taxes climbed slightly year-on-year to USD1.83 billion from USD1.74 billion.
Within the Downstream business, fuels reported underlying RC profit before interest and taxes of USD1.40 billion for the first quarter compared to USD1.20 billion for the same period a year prior. This was driven, BP said, by a higher refining results partially offset by a lower supply and trading contribution.
Lubricants underlying RC profit actually fell year-on-year, to USD331.0 million from USD393.0 million as premium brand growth was "more than" offset by increased base oil prices.
Petrochemicals underlying RC profit also declined to USD97.0 million from USD149.0 million, which BP attributed to higher turnaround activity as well as its divestment of its stake in its SECCO joint venture in the last quarter of 2017.
Looking ahead in Downstream, BP expects seasonally higher refining margins in the second quarter but lower discounts for North American heavy crude oil, as well as higher turnaround activity.
Underlying RC profit before interest and taxes from its stake in Russian oil company Rosneft, which stands just below 20%, was USD247.0 million, well above the USD99.0 million reported in the same period a year earlier. It was, however, below the USD321.0 million RC profit it booked from Rosneft in the last quarter of 2017.
Chief Executive Bob Dudley said: "We have delivered another strong set of results. Our safe and reliable operations and strong financial delivery have continued into 2018. Underlying profit was up 23% on the previous quarter and was our best quarterly result in three years."
"With rising output from our new major projects and excellent reliability, Upstream production was 9% higher than a year earlier."
Dudley added: "Moving through 2018 we're determined to keep delivering our operational targets and maintaining capital discipline while growing cash flow and returns."
BP shares were up 1.7% midday Tuesday at 546.80 pence each, while Shell 'A' shares were up 0.3% at 2,539.50p and Shell 'B' shares were at 2,610.00p, likewise up 0.3%.
