BP 1Q profit rises 63 percent
LONDON—BP PLC, Europe's second biggest oil producer, reported a 63 percent surge in first quarter net profit on Monday after crude oil prices soared to an all-time high and natural gas prices also rose.
BP posted net profit for the first quarter of 2008 of US$7.6 billion (euro4.9 billion), compared with US$4.4 billion in the first quarter of 2007.
The jump in net profit and accompanying 44 percent rise in revenue to US$89.2 billion; euro57.1 billion) were well ahead of analysts' expectations.
Evolution Securities analyst Richard Griffith said the results showed that operational improvements BP Chief Executive Tony Hayward made his priority when he took the reins a year ago are well advanced.
Hargreaves Lansdown analyst Keith Bowman said BP had posted "an exceptional set of numbers."
"Although this should not come as a complete surprise, given historically high energy prices, management have been battling against a serious of operational difficulties and the results may indicate that challenges are being won," he added.
BP shares jumped 5.5 percent to 610 pence (US$12.05; euro7.71) on the London Stock Exchange.
Hayward, who replaced John Browne, has focused on bringing new production and refining capacity on line to improve earnings, which have lagged behind rivals such as Exxon Mobil Corp. and Royal Dutch Shell PLC.
Shell, Europe's largest oil company, also reported huge gains from rising energy prices, posting a 25 percent rise in first quarter earnings on Monday to a record US$9.08 billion. Sales at the Anglo-Dutch company rose 55 percent to US$114 billion (euro72.95 billion).
BP's closely watched replacement cost profit rose 48 percent to US$6.59 billion (euro4.34 billion), compared with US$4.44 billion in the first quarter of 2007.
The replacement cost figure is viewed by many analysts as the best measure of an oil company's underlying performance because it excludes changes in the value of crude inventories, measuring the amount it would cost to replace assets at current prices.
The earnings from both oil majors were supported by record oil prices and high gas prices.
Crude oil reached hit a then-record US$111.80 per barrel during the quarter in March, while gas jumped an average of 22 percent over the quarter.
Crude reached an all-time record US$119.93 on Monday.
BP said its total oil and gas production for the first quarter of this year was unchanged at 3.91 million barrels of oil equivalent a day due to the impact of lower entitlement in production sharing agreements. Adjusted for the impact of these agreements, BP said production was 5 percent higher than the first-quarter of 2007, reflecting the ramp up of new projects in the fourth quarter.
However, it added that it will take a smaller share of output from production-sharing agreements in some countries if the price remains over US$100 in 2008, offsetting the underlying growth in production.
The company said refining availability improved for the sixth successive quarter as BP began to restore operations at its Texas City and Whiting refineries in the United States, although maintenance at the Carson refinery lowered total throughput 3.0 percent to 2.2 million barrels a day in the first quarter.
The Texas City facility cut back production after a deadly explosion and hurricane damage in 2005 and the Whiting refinery was damaged in a fire last year.
Refining margins were significantly weaker at US$4.57 a barrel, compared with US$9.45 a barrel a year ago. Margins improved in the second quarter of 2008, but still remain lower than last year, BP said.
Charles Stanley & Co. analyst Tony Shephard said the company's recovery still had some way to go.
"BP is still not firing on all cylinders but its operational turnaround looks to be on track with a strong second half recovery in prospect," he said.
The benefit from the recommissioning of the Whiting, Indiana and Texas City refineries in the United States would be more apparent in the second half, he said.
