BP’s profit triples on higher oil prices and output

BP’s profit nearly tripled in the first quarter of 2017 from a year earlier thanks to higher oil prices and production, and as its sharp cost cutting drive bears fruit.

BP 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.

The results could assuage concerns among investors, who were jolted when BP in February raised the oil price at which it can balance its books this year to $60 a barrel after a string of investments.

Investors are now turning their attention to cash generation that will allow companies to cover spending and dividend payouts and reduce ballooning debt. London-based BP is set to start up eight projects this year, including in Oman and Azerbaijan, the largest number in the company's history in a single year. It hopes to add 800,000 barrels per day of new production by the end of the decade.

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“Rising production from new upstream projects is expected to drive a material improvement in operating cash flow from the second half of 2017,” the company said in its results statement.

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. Its operating cash flow in the quarter rose to $4.4 billion from $3 a year earlier Oil prices, a major driver for BP’s earnings, averaged around 35 percent above prior-year levels, helping to boost revenue from its core oil and gas production division.

On an underlying basis, BP nearly trebled replacement cost profits to $1.5 billion from $532 million a year earlier. The better-than-expected figures came after BP said it saw a 5 per cent rise in production, boosted as the first of a raft of new projects came on stream.

Mr Dudley said: "The first of our seven new upstream 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."

The figures follow impressive earnings reports from US rivals ExxonMobil and Chevron last week as the industry benefits from a bounce back in crude prices, which had hit near 13-year lows early last year.

BP's closest rival, Royal Dutch Shell, is also expected to post a leap in profits when it reports on Thursday. First quarter figures from BP come after it revealed last month it had slashed Mr Dudley's 2016 pay package by 40 per cent and cut his maximum earnings by $3.7 million to see off a fresh shareholder rebellion. Its annual report showed Mr Dudley's pay package was cut to $11.6 million as the group looked to avoid a repeat of last year's investor revolt, when almost 60 per cent of BP shareholders voted against his 20 per cent pay hike.

Reuters