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BP profits surge by 71% on higher oil prices

02 May, 2018, 02:09 | Author: Sara Gill
  • BP profits fly up 71 per cent as company releases best results in three years

The company said Tuesday its replacement cost profit - a number analogous to the net income that USA oil companies report - was $2.4 billion in the first quarter, compared with $1.4 billion in the same period a year earlier.

Underlying replacement cost profit, a key measure used by analysts to assess BP's profitability, came in ahead of expectations at $2.6bn, but investors could be spooked by a rise in debt from $38.6bn to $40bn.

A almost 25 percent rise in oil prices over the past year to over $70 a barrel has lifted revenue for oil companies, shifting investors' focus to how much cash they can generate following years of cost cuts.

United Kingdom supermajor BP posted a rise in profits during the first three months of 2018 as the upstream segment posted its strongest quarter since 2014.

"The spill payment in the first quarter was "$500 million more than I expected", although that probably means the burden will be lower later this year, said Redburn analyst Rob West, as quoted by Bloomberg.

BP paid out $1.6bn for the Gulf of Mexico spill in the quarter. Including spill costs, cash flow was $3.6 billion, up from $2.1 billion a year earlier.


Underlying profit was also 23 per cent higher than the previous quarter, marking BP's best results in three years.

BP's results follow a mixed picture from the sector with Royal Dutch Shell RDSa.L and Exxon Mobil XOM.N falling short of forecasts while results from Chevron CVX.N and France's Total TOTF.PA were stronger than expected. Still, the supermajor made a decision to leave dividend unchanged at US$0.10 per share and continue with its share buybacks launched when oil prices began to improve to reassure investors the worst is over.

"Moving through 2018 were determined to keep delivering our operational targets and maintaining capital discipline while growing cash flow and returns". Gilvary also raised the prospect of increasing dividends.

BP's gearing, the ratio between debt and BP's market value, stood at 28.1 percent at the end of the quarter, up from 27.4 percent at the end of 2017.

The bill included a final $1.2bn payment as part of a $20bn settlement with the US Department of Justice, but the giant still has a number of smaller legal bills to pay.

The further hit from the spill in the first quarter sent the firm's debt levels rising to 40 billion USA dollars (£29 billion) from 38.6 billion U.S. dollars (£28.2 billion) a year ago. Payments are expected to be just over $3 billion in 2018, weighted to the first half of the year.

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