BP BP Plc

By Sarah Kent 

LONDON -- BP PLC shares rose to their highest level since 2010, boosted by frothy oil prices that have helped return the stock to levels not seen since the month after the Deepwater Horizon disaster.

Like the handful of big oil firms that have already reported in recent days, London-based BP benefited handsomely from recently lofty oil prices. It also reported rising production, helping it post its strongest quarterly earnings since the middle of 2014.

Tuesday's solid first-quarter results could go some way toward convincing investors that BP's ambitious plan to regain its position among the world's top energy companies is gaining steam.

BP's shares rose more than 1% in early London trading, after touching a high of GBP5.48, or about $7.50. The last time the company's share price was at that level was in the immediate aftermath of the Deepwater Horizon explosion in April 2010. The disaster killed 11 and sent oil spewing into the Gulf, resulting in the worst offshore oil spill in U.S. history.

BP's shares hit a two-year high of GBP6.58 on April 21, 2010, the day after the explosion but before investors had a firm handle on the scale of the disaster. It quickly hurtled lower, hitting a low of GBP2.96 in June 2010.

Then-Chief Executive Tony Hayward resigned the following month, and BP started what would turn out to be a multiyear, multibillion-dollar effort to recover. To pay for cleanup costs and legal fees, BP was forced to sell off billions of dollars in assets, dramatically shrinking the size of the company. To date, the spill has cost BP more than $65 billion.

It agreed to a landmark $20 billion deal to settle all federal and state claims for the accident in 2015. Since then, executives, including Chief Executive Bob Dudley, have tried to turn the page on the disaster. Part of that effort has been a plan to return its oil-and-gas production to 4 million barrels a day, while boosting profits and cash flow.

The company said Tuesday its replacement cost profit -- a number analogous to the net income that U.S. oil companies report -- was $2.4 billion in the first quarter, compared with $1.4 billion in the same period a year earlier. The last time it reported profits of that size was in the third quarter of 2014 when oil prices were hovering near $100 a barrel.

In addition to its Deepwater Horizon woes, BP suffered with the rest of the industry through years of low oil prices. Oil prices fell to as low as about $25 a barrel by 2016, though have recovered strongly since then. International crude is now trading near $75 a barrel.

The company's production, meanwhile, rose 6% in the first quarter compared with a year ago. BP started a record number of new projects around the world last year and is planning to begin production at six more in 2018, part of a plan to add 900,000 barrels a day of new production by 2021. The strategy puts it on track to return output to its pre-Deepwater Horizon levels of around four million barrels a day, by the early 2020s. On Tuesday, it said it pumped 3.7 million barrels a day in the first quarter.

The company's Chief Financial Officer Brian Gilvary also raised the prospect that BP could consider raising its dividend in the second half of the year as it expects debt levels to come down. It kept its payout unchanged for the first quarter.

But BP still hasn't escaped the financial liabilities that have hobbled it since Deepwater Horizon. The company said it paid out $1.6 billion in the first quarter related to the accident. That included the final installment from a settlement with the Justice Department to resolve all criminal claims. In total, payments are expected to total just over $3 billion in 2018. The company then faces charges of about $2 billion next year, and then more than $1 billion a year out past 2030.

BP caps a mixed earnings season for the world's biggest oil companies. Exxon Mobil Corp., Chevron Corp. and Royal Dutch Shell PLC posted their best first-quarter profits in years, but investors remained skeptical of companies that failed to meet expectations during three months when oil prices reached their highest level since 2014.

Write to Sarah Kent at sarah.kent@wsj.com

(END) Dow Jones Newswires

May 01, 2018 07:00 ET (11:00 GMT)

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