BP back in the black with $1.4 bn Q1 profit

BP reported a profit of $1.4 billion (£1.1 billion) for the January-March quarter against a loss of $485 million (£377 million) a year earlier, on the back of higher price of Brent crude and measures taken to cut cost.

BP said its replacement cost profit - a key industry measure of profitability - was $1.4 billion (£1.08 billion), compared to a loss of $485 million in the same period a year ago.

Profit adjusted for one-time items and inventory changes rose to $1.51 billion from $532 million a year earlier.

In February, BP had reported an annual loss of $999 million for 2016.

While most oil firms have come under pressure after the cost of a barrel of Brent tumbled to less than a third over the last two years, BP had the additional burden of paying damages for the Gulf of Mexico oil spill in 2010.

Though oil prices have recovered to over $50, helped an agreement by oil-producing countries to curb production in the face of oversupply and weak demand, a recovery seemed still distant for BP.

"The oil price is always going to be a factor, but we are performing well," BP finance director Brian Gilvary said. He said improved earnings reflected a recovering oil price as well as a focus on cutting costs, which are down by $7 billion a year compared with 2014.

BP has been cutting thousands of jobs in the face of the tough market. But Gilvary said, "The environment is still uncertain," adding that much will depend on factors such as whether oil production cuts are extended and the level of US shale gas flowing into the market.

"Our year has started well. BP is focused on the disciplined delivery of our plans," chief executive Bob Dudley said.

BP said it paid $2.3 billion in charges related to the Deepwater Horizon blow-out in the Gulf of Mexico in the first quarter and that the claims related to it continues to weigh on the company, BP said it.

BP said it expected to make a total $4.5-$5.5 billion in damage payments during 2017.

It has set aside a total of $62.7 billion so far to cover costs since the disaster, adding a $161 million in charges during the first quarter.

Yet, BP hopes to recover losses with the start of seven production projects this year, the largest number in a single year in its history.

BP hopes to add 800,000 barrels per day of new production by the end of the decade.

Like BP, major rivals such as Exxon Mobile, Chevron and Total have posted stronger than expected quarterly earnings helped by higher oil prices.

The price of European benchmark Brent crude averaged $54.61 a barrel in the first quarter, 55 per cent more than a year earlier and the highest in more than two years. Prices are down 9.6 percent this year as global supplies remain high despite production cuts.

BP's shares have fallen 13 per cent in London this year, with Shell's B shares also falling by an equal percentage. Total share has declined 3.2 per cent. BP rose 44 per cent last year, the first annual gain in three years.