BP profits more than double thanks to rising global oil prices

BP's first-quarter results smashed analysts' expectations, with a 135 per cent rise in profits yesterday, thanks to rising oil prices and improved performance from the group's refineries.

The oil giant's replacement cost profit came in at $5.6bn (£3.7bn) in the first three months of 2010, more than double the $2.39bn of profits made in the same period of last year. Even without the effect of non-operating items and accounting effects the profits were up by 118 per cent, compared with City forecasts of a rise of around 85 per cent.

The unexpectedly strong results were overshadowed by last week's explosion on contractor Transocean's Deepwater Horizon rig, which killed 11 people and is responsible for a growing oil slick in the Gulf of Mexico. BP's shares plunged by a whopping 16.8 per cent yesterday, to close at 610p.

The key factor in the company's booming profits is the rising price of oil. All the oil majors were hit hard as oil tumbled from an all-time high of $147 per barrel in July 2008, down to only slightly more than $30 by the following Christmas.

Production restraints put in place by Opec – the cartel of the 12 biggest oil producing countries – were effective in putting a floor under the price in 2009, and so far this year, the price has climbed to more 18-month highs of over $86 on the strength of the improvement in the global economy.

Against such a background, BP's exploration and production (E&P) business saw a near-doubling in profits to $8.3bn, compared with the previous year. At 4 million barrels of oil equivalent per day, the group's production levels remained broadly flat. But the "average hydrocarbon realisation" level – or the actual price BP achieves for its products – was up by 7 per cent on the previous quarter and by 57 per cent on the same period of 2009.

Byron Grote, the company's chief financial officer, said: "The performance of the E&P business reflects the improved price environment and continued underlying operational momentum."

The picture from the group's refining and marketing division was more mixed. Profits of $790m were sharply up on the $19bn loss in the previous quarter. But they were still some 33 per cent lower than in the first quarter of last year as refining margins across the industry continue to be under pressure.

On the plus side, BP's refining capacity was running at 94 per cent availability over the three-month period, a considerable improvement on last year's 88 per cent. The division's costs were also down, largely due to cyclical procurement arrangements. But margins of $3.08 per barrel remain weak compared with early 2009, despite some improvements thanks to growing demand from recovering global economies.

Although global appetite for refined products is now rebounding, the oil industry still faces a longer-term structural issue. The majority of refinery capacity is in developed countries, where demand is set to continue to fall thanks to efficiency improvements. Meanwhile, growth is in developing economies not economically served by the same refineries.

BP's overall strategy is to boost oil and gas production by 2 per cent per year over the next five years, while simplifying its portfolio. In line with the plan, BP is selling its French retail business and withdrawing from five African countries. And last month the group signed a $7bn deal to buy assets from Devon Energy in the Gulf of Mexico, Canada, Azerbaijan and Brazil.

Mr Grote said: "The transaction with Devon gives us a material position in Brazil, deepens our incumbency in the Gulf of Mexico and Azerbaijan and enables us to accelerate the development of the Kirby field in Canada."

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooksNow available in paperback
The 67P/CG comet as seen from the Philae lander
scienceThe most important scientific breakthroughs of 2014
Arts and Entertainment
Ian McKellen as Gandalf in The Hobbit: The Battle Of The Five Armies
Arts and Entertainment
Sarah Koenig, creator of popular podcast Serial, which is to be broadcast by the BBC
tvReview: The secret to the programme's success is that it allows its audience to play detective
Ruby Wax has previously written about her mental health problems in her book Sane New World
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Marketing Services Manager - (communications, testing, DM)

£32000 - £35000 per annum + benefits: Ashdown Group: Marketing Services Manage...

Guru Careers: Finance Account Manager

£Neg. (DOE) + Excellent Benefits: Guru Careers: A Finance Account Manager with...

Ashdown Group: Java Developer - Hertfordshire - £47,000 + bonus + benefits

£40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...

Ashdown Group: Direct Marketing Manager - B2C, Financial Services - Slough

£45000 - £55000 per annum + Benefits: Ashdown Group: An exciting opportunity h...

Day In a Page

Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Could cannabis oil reverse the effects of cancer?

Could cannabis oil reverse effects of cancer?

As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

The Interview movie review

You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
Serial mania has propelled podcasts into the cultural mainstream

How podcasts became mainstream

People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
Jesus Christ has become an unlikely pin-up for hipster marketing companies

Jesus Christ has become an unlikely pin-up

Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
Rosetta space mission voted most important scientific breakthrough of 2014

A memorable year for science – if not for mice

The most important scientific breakthroughs of 2014
Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

Christmas cocktails to make you merry

Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
5 best activity trackers

Fitness technology: 5 best activity trackers

Up the ante in your regimen and change the habits of a lifetime with this wearable tech
Fifa's travelling circus once again steals limelight from real stars

Fifa's travelling circus once again steals limelight from real stars

Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
Frank Warren column: 2014 – boxing is back and winning new fans

Frank Warren: Boxing is back and winning new fans

2014 proves it's now one of sport's biggest hitters again
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas
La Famille Bélier is being touted as this year's Amelie - so why are many in the deaf community outraged by it?

Deaf community outraged by La Famille Bélier

The new film tells the story of a deaf-mute farming family and is being touted as this year's Amelie