BP's Q1 profit slump buffered by higher output, stronger trading

London

BP's first-quarter profits fell by nearly a third but beat forecasts as lower oil and gas prices and weaker refining margins were partly offset by higher production and stronger trading.

The slump in profits marks the first significant dent in BP's steady recovery over the past 18 months following the sector's 2014 downturn.

"We produced resilient earnings and cash flow through a volatile period that began with weak market conditions and included significant turnarounds," chief executive officer Bob Dudley said. BP shares were up 0.4 per cent in early trade.

Profits from refining and retail operations, known as downstream, fell by around one fifth on weaker margins and narrower discounts of heavy crude oil that benefit BP's 413,500 barrel-per-day Whiting, Indiana refinery.

The fall was nevertheless mitigated by stronger results from trading, which have often in the past helped the company weather volatile markets, as well as better earnings from its retail division. BP does not disclose its trading profits.

The downstream performance contrasts with rivals Exxon Mobil and Chevron, whose trading operations are smaller than BP's. They saw larger-than-expected falls in profits on weak US petrol prices.

Exxon posted its first loss in refining since 2009. France's Total also posted a drop in profits. Royal Dutch Shell reports Q1 results on Thursday.

Refining margins rebounded in April, boosted by tighter petrol supplies and a string of planned and unplanned refinery outages around the world.

London-based BP's Q1 underlying replacement cost profit, the company's definition of net income, came to US$2.4 billion, exceeding forecasts of US$2.3 billion in a company-provided survey of analysts. That was down from US$2.6 billion a year earlier and from US$3.5 billion in the fourth quarter of 2018.

Cashflow from operations, which had risen to their highest level in four years in the previous quarter, fell by over 20 per cent to US$5.3 billion.

"We remain constructive on BP for its medium-term growth profile and improving cash flow framework," RBC Capital Markets analyst Biraj Borkhataria said in a note.

Oil and gas production in the quarter, excluding BP's stake in Russia's Rosneft, rose 2 per cent from a year earlier following the acquisition of BHP's onshore US shale portfolio and the start-up of new projects.

Gearing, the ratio between debt and BP's market value, rose slightly to 30.4 per cent as of the end of March following the BHP acquisition and a change in accounting reporting.

Net debt was US$45.1 billion. BP said it expected "significantly higher" refinery maintenance activity in the second quarter. REUTERS