Due mostly to the low price of oil, BP's adjusted earnings for the first quarter of 2015 dropped to $2.58 billion, down by nearly 20 percent from the same period a year earlier, but a 15 percent improvement over the fourth quarter of 2014.
Despite the loss, the British oil giant's earnings exceeded the expectations of industry analysts, who had forecast earnings of $1.28 billion.
In fact, BP made a $2.2 billion profit from its refining, compared with $1 billion a year earlier. The bad news was that profits from upstream operations - oil extraction - fell sharply from $4.4 billion in the first quarter of last year to $604 million in the same period of 2015. This was partly because the company canceled two deep-water projects in the Gulf of Mexico, at a cost of $545 million. Related: How Much Does OPEC Really Earn?
Refining is one area where lower oil prices can benefit energy companies. In BP's case, income from refining improved, at least in part, because the company recently sold some of its less profitable plants and concentrated on more efficient facilities. As a result, its profit margins on refining grew because the company pays less for the crude before it is refined.
Still, this wasn't a strong earnings report for BP, Anish Kapadia, an energy analyst at the Houston investment bank Tudor, Pickering, Holt & Co. told Reuters. "Earnings look very strong thanks to the downstream [such as refining], but underlying earnings in upstream [oil production] and the overall cash flow were extremely weak," he said.
Despite the mixed results, CEO Bob Dudley said the company would maintain a dividend of 10 cents a share. "The dividend is the first priority within our financial framework," he said in a statement, "...and the board is committed to maintaining it, as we have today." Related: Former BP Chief Sees Oil Price Rebound Soon
For that reason and because BP's earnings exceeded analysts' forecasts, the company's shares immediately rose by about 1.5 percent in morning trading on London exchanges.
Like many large oil companies contending with the low price of oil, BP has been cutting capital expenditures and selling off some assets to keep its costs in line and raise money. BP in particular is coping not only with dramatically low oil prices but also the costs associated with the 2010 Deepwater Horizon spill in the Gulf of Mexico. Related: How The Majors Are Playing The Oil Price Slump
Most recently, BP announced last week that it would be selling its 36.22 percent stake in the Central Area Transmission System, one of the UK's biggest pipelines, for $486 million. This sale is one of several in a program to raise $10 billion in cash, and Dudley said it won't be the last.
"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," Dudley's statement said.
"We are continuing to progress our planned divestment program, we are resetting our level of capital spending," Dudley said, "and we are addressing costs through focusing on simplification and efficiency throughout BP."
By Andy Tully of Oilprice.com
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Andy Tully is a veteran news reporter who is now the news editor for Oilprice.com More