BP Shares, Boosted by Higher Oil Prices, Hit Eight-Year High

BP plc share price

BP plc share price

Bob Dudley, chief executive, hailed a "strong set of results", which were the oil major's best quarterly performance in three years.

BP's profits leapt by 69 per cent to $2.4 billion in the first quarter as higher oil prices and increased production helped the energy giant beat expectations.

Shareholders react positively to the highest profit in years even as the continuing burden of oil-spill payments push debt higher.

BP reported in a statement this morning that its underlying replacement cost profit for the first three months of the year had climbed to $2.6 billion, compared with $1.5 billion in the prior-year period, with the group's upstream division reporting its strongest quarter since third quarter 2014 on both a replacement cost and underlying basis. Dudley has cut costs and sold assets and BP has benefited from a partial recovery in the price of oil, which plunged from $110 a barrel in 2014 to less than $30 in early 2016 but has since rallied to more than $74 a barrel.

That was up from $1.5 billion a year earlier and from $2.1 billion in the fourth quarter of 2017.

BP's operating cash flow, not including oil spill payments, amounted to US$5.4bn and included a US$1.8bn draw related to increased capital spending.

Total production advanced six percent to 3.7 million barrels of oil equivalent per day.

Still, what investors are watching most closely is cash flow, as this is what pays the bills in oil and gas, not net profits that some observers have aptly noted can be adjusted to suit the reporting company's needs.

It paid out some US$1.6bn in payments connected to the Gulf of Mexico oil spill, including the US$1.2bn final payment relating to the 2012 settlement with the US Department of Justice.

Moving through 2018 we're determined to keep delivering our operational targets and maintaining capital discipline while growing cash flow and returns. It is still paying on it, and it will continue to pay for several more years, but as oil prices improve so has BP's outlook for the future. Royal Dutch Shell Plc generated less cash than analysts forecast in the first quarter and its shares were hammered after Chief Financial Officer Jessica Uhl said the company wasn't yet ready to commence a $25 billion stock-repurchase program. Payments are expected to be just over $3 billion in 2018, weighted to the first half of the year.

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