BP Swings to Profit as Oil Sector Shakes Off Woes -- 2nd Update
May 02 2017 - 8:26AM
Dow Jones News
By Sarah Kent
LONDON-- BP PLC was the latest big oil company to report a sharp
increase in profit Tuesday, adding to optimism that the sector may
have passed the worst following the dramatic slump in energy
prices.
The British oil giant said it swung to profit in the first
quarter, benefiting from a roughly 60% increase in prices since the
first quarter of 2016 and higher production volumes.
The results were the latest in a flurry of upbeat earnings from
the world's biggest oil companies, several of which have enjoyed
their most successful quarter in more than a year. The improvement
has left investors hopeful that the sector may be recovering
following the tumble in oil prices after the summer of 2014.
Last week, Exxon Mobil Corp. reported its best quarter since
2015. Chevron Corp. posted a profit of $2.7 billion, after
reporting a loss for 2016 and France's Total SA said its profit
surged 77% in the first three months of 2017. Royal Dutch Shell PLC
is due to report later this week.
BP said Tuesday its replacement cost profit--a number analogous
to the net income that U.S. oil companies report--was $1.4 billion
in the first quarter, compared with a loss of $485 million in the
comparable period a year earlier.
The results were some of the company's strongest since it
announced a massive $20 billion deal to settle outstanding claims
relating to its Gulf of Mexico blowout.
The company's share price jumped 2.4% in early London trading as
investors reacted positively to the results.
The pretax bill for the 2010 disaster that killed 11 workers and
spilled millions of barrels of oil into the sea has reached nearly
$63 billion, BP said.
The payments relating to the spill are expected to total between
$4.5 billion and $5.5 billion in 2017, before falling to around $2
billion in 2018.
The company reported robust operating cash flow in the first
quarter, which is expected to continue to improve. Excluding
payments related to the oil spill, the company's cash flow from
operations improved to $4.4 billion in the first quarter, helping
it maintain a dividend of 10 cents a share.
This will reassure investors, who received a jolt in February
when the company said it needed oil prices to rise to $60 a barrel
to break even. That number is expected to drift closer to $55 a
barrel in 2017. Cash flow is also seen strengthening as part of
BP's plan to bring on seven new projects this year.
The company sees oil trading at $50-$55 a barrel in 2017, likely
capped by stronger shale production in the U.S., Chief Financial
Officer Brian Gilvary said, despite efforts by the Organization of
the Petroleum Exporting Countries to curb output and boost
prices.
Write to Sarah Kent at sarah.kent@wsj.com
(END) Dow Jones Newswires
May 02, 2017 08:11 ET (12:11 GMT)
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