BP PROFIT FALLS 20%

BP suffered a sharp slide in first-quarter profits, hit by the plunge in crude prices that has battered revenues across the oil industry.

The UK-based energy company on Tuesday reported a 20 per cent fall in underlying replacement cost profits, analysts' preferred measure, to $2.6bn, compared with $3.2bn for the first three months of 2014.

The decline was due in large part to a halving in the price of Brent crude, which averaged $54 a barrel over the period versus $108 for the same three months a year ago. Prices have tumbled since last summer on the back of a glut in supplies of US shale, weaker than expected global demand and Opec's decision in November not to cut oil output.

Gas prices were some 40 per cent lower than a year earlier.

But the fall in profits was not as steep as expected, with a strong performance in refining and oil trading operations offsetting a collapse in profits from exploration and production from $4.4bn to just $600m.

The US business made an upstream loss of $550m, hit by the payment of cancellation fees for two big offshore drilling rigs in the Gulf of Mexico.

The contribution to profits from the group's stake in Russia's state-owned Rosneft fell from $271m to $183m.

Oil and gas production, excluding Russia, rose 8.3 per cent as new projects that came onstream last year ramped up output, helping offset the impact of lower oil prices. The UK's decision to cut taxes on North Sea profits in last month's Budget also helped shore up profits, a one-off tax credit adding several hundred million dollars to the result.

BP has embarked on a severe cost-cutting and disposals programme in the wake of the oil price fall and the 2010 Deepwater Horizon spill, saying in February that capital expenditure — money poured into new projects — would be some 20 per cent lower this year, at about $20bn.

It said it remained on track to divest a further $10bn of assets by the end of this year, with total sales now reaching $7.1bn.

Bob Dudley, chief executive, said: "We are resetting and rebalancing BP to meet the challenges of a possible period of sustained lower prices. Our results today reflect both this weaker environment and the actions we are taking in response.

"We are continuing to progress our planned divestment programme, we are resetting our level of capital spending, and we are addressing costs through focusing on simplification and efficiency throughout BP."

The group increased total liabilities for the Deepwater Horizon disaster to $43.8bn.

The quarterly dividend of 10 cents a share is unchanged from the previous quarter. Mr Dudley said the payout was the group's "first priority".

Shares in BP rose 1.5 per cent to 484.1p in early London trading.

ft.com