BP share price edges higher despite Q1 profit slipping

BP saw its share price edge higher after its Q1 results came in broadly as expected, despite the oil and gas company recording a slight decline in profit that was blamed on tough market conditions.

The British oil and gas major posted underlying replacement cost profit, used as a proxy for net profit, of $2.4 billion, which is slightly higher than the $2.3 billion forecast in a recent Reuters poll. But the figure was less than the $2.6 billion it recorded during the same period a year prior and significantly lower than the $3.5 billion the company recorded in Q4 2018.

‘BP’s performance this quarter demonstrates the strength of our strategy,’ BP Group CEO Bob Dudley said. ‘With solid Upstream and Downstream delivery and strong trading results, we produced resilient earnings and cash flow through a volatile period that began with weak market conditions and included significant turnarounds.’

‘Moving through the year, we will keep our focus on disciplined growth, with efficient project execution and safe and reliable operations.’

BP results: key figures

Underlying profits in the company’s Upstream business declined by 7.3% year-on-year to $2.9 billion, while its Downstream unit saw profits increase by 3% to $1.8 billion, strengthened by it’s a strong performance from its petrochemicals business.

Operating cash flows in Q1 hit $5.3bn, up 45.3% year-on-year, with that figure including a $0.6bn payment relating to the Gulf of Mexico oil spill. BP has also increased spending, with capital expenditure Q1 climbing to $5.6bn, driven by increases in organic and inorganic expenditure.

BP ended Q1 with net debts of $45.1bn, up from $39.3bn a year ago, with the increase primarily driven by the company’s acquisition of assets from BHP.

‘Our first quarter results reflect the effects of IFRS 16 for the first time,’ BP CFO Brian Gilvary said. ‘While this impacts a number of lines across our financial statements, our financial framework is unchanged.’

‘In particular, we have retained a measure of gearing broadly consistent with the past and continue to target a range of 20-30%.’

BP hit by tough market conditions

The company blamed its weaker Q1 performance on adverse weather conditions that put a several of its key assets out of action, as well as a slide in oil prices in January.

However, oil prices have recovered well this year, breaking through $70 levels and staying there, with the international benchmark Brent crude and US West Texas Intermediate (WTI) both climbing by around 33% and 40% year-to-date.

Brent crude stood at $71.82 on Tuesday morning, while WTI traded at $63.43.