BP's profit surge 71% on higher oil prices and output

BP's profit surge 71% on higher oil prices and output

BP's chief financial officer Brian Gilvary said that factors that reduced the company's first-quarter cash flow - increases in working capital and payments related to the oil spill from the Macondo well in the Gulf of Mexico - would fade later in the year.

United Kingdom supermajor BP posted a rise in profits during the first three months of 2018 as the upstream segment posted its strongest quarter since 2014.

Underlying profits were also up, with BP posting an underlying recurring cost profit of almost $2.6 billion, up from $1.5 billion a year earlier.

Bob Dudley added: "Moving through 2018 we're determined to keep delivering our operational targets and maintaining capital discipline while growing cash flow and returns. Our safe and reliable operations and strong financial delivery have continued into 2018", said BP's chief executive.

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"Overall it was a very healthy set of results", said Martijn Rats, analyst at Morgan Stanley, which has a "neutral" recommendation on BP stock.

Stripping out one-off costs, underlying profits rose to $2.6 billion, up 71 per cent from $1.5 billion in the same period a year earlier and significantly ahead of market expectations of $2.2 billion.

In the first three months of 2018, however, BP's debt rose to $40 billion due to the settlement of more lawsuits over the deadly 2010 Deepwater Horizon spill in the Gulf of Mexico which has cost it more than $65 billion. "This should help improve confidence around BP's dividend".

The London-based company reported net income of $2.47 billion, up from $1.45 billion in the same period a year ago.

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"The results definitely benefit from a higher oil price that we've seen come through", Gilvary noted.

The company's production, meanwhile, rose 6% in the first quarter compared with a year ago. Still, the supermajor chose to leave dividend unchanged at US$0.10 per share and continue with its share buybacks launched when oil prices began to improve to reassure investors the worst is over.

"It's not only about the oil price, it is also about the performance of the kit", Gilvary said. The company paid out $1.6 billion on a pretax basis for the Deepwater Horizon disaster, including a final $1.2 billion payment to the U.S. Department of Justice.

The further hit from the spill in the first quarter sent the firm's debt levels rising to 40 billion United States dollars (£29 billion) from 38.6 billion U.S. dollars (£28.2 billion) a year ago. BP is expected to pay $3 billion in 2018.

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