Rising oil prices help BP profits jump 71% in first quarter

Oil giant is still paying off settlement over 2010 Deepwater Horizon disaster

Favourable foreign exchange rates also helped the company's balance sheet (Reuters)

Rising oil prices helped BP grow profits by 71 per cent in the first three months of 2018.

The oil giant reported profits of $2.6bn (£1.9bn) for the first quarter, up from $1.5bn in the same period last year, which “primarily reflects higher oil prices and a favourable foreign exchange impact”.

The group said it produced 3.7 million barrels of oil equivalent per day during the quarter, a 6 per cent rise compared with the first quarter of 2017.

The firm maintained its interim dividend of 10 cents per share – if the company also keeps the full-year dividend unchanged in 2018 at 40 cents per share, or around 29p per share at current rates, it will be the third biggest dividend payer overall within the FTSE 100.

Meanwhile, BP made $1.6bn in payments relating to the Gulf of Mexico oil spill, which included $1.2bn for the final payment relating to the 2012 Department of Justice criminal settlement. BP received the biggest criminal fine in US history after the Deepwater Horizon oil spill killed 11 people in April 2010 and saw 4.2 million barrels of oil spilt into the Gulf of Mexico. The group said it expects to pay out $3bn connected with the disaster over the course of 2018.

“We have delivered another strong set of results. Our safe and reliable operations and strong financial delivery have continued into 2018,” said BP’s chief executive. “Moving through 2018 we’re determined to keep delivering our operational targets and maintaining capital discipline while growing cash flow and returns.”

The oil major reported operating cash flow of $5.4bn in the first quarter, excluding amounts related to the Gulf of Mexico spill, which was an improvement on the $4.4bn cash generated in the same period of last year.

Nicholas Hyett, equity analyst at Hargreaves Lansdown, said it was a positive sign that BP’s improved profits were being converted to cash on the balance sheet, because “BP is seeing more demand on that cash than most”. “It’s still shelling out billions of dollars in compensation for the Deepwater Horizon disaster,” he noted.

The group’s dividend also remains substantial and is now accompanied by a share buyback programme, and the firm will need to address its debt pile, which widened to $40bn by the end of March from $38.6bn a year ago.

However, Mr Hyett said BP still has reason to be optimistic: “Improving conditions, declining Gulf of Mexico costs, and some dramatic increases in upstream production mean the future looks brighter.

“Perhaps most importantly the dividend looks increasingly secure. If net debt goes into decline next quarter, then BP will be well and truly on the road to recovery.”