In another sign that oil majors are recovering with the help of higher oil prices this year, BP (NYSE:BP) reported on Tuesday a first-quarter underlying replacement cost profit – its definition of net income – of US$1.51 billion, nearly triple the US$532-million profit for the first quarter last year and beating the consensus estimates of US$1.26 billion.
BP was largely expected to report a strong recovery in profits, but the analyst consensus was pegged at US$1.26 billion, according to The Times.
Following last week’s Q1 earnings released by the U.S. majors, Exxon and Chevron, which both easily beat estimates, now BP’s figures are the latest signal that the oil industry’s supermajors are starting to shake off the effects of the oil price rout.
Excluding post-tax amounts related to the Gulf of Mexico oil spill, BP’s operating cash flow jumped to US$4.4 billion in Q1 2017 from US$3.0 billion for the same period last year.
BP’s oil and gas production increased by 5 percent compared to the first quarter of 2016. In the upstream, BP expects 800,000 boed of new production by 2020, it said.
Organic capital expenditure for Q1 2017 dropped to US$3.5 billion from US$4.5 billion for the same period in 2016. BP continues to expect total 2017 organic capex in the range of US$15-17 billion.
BP, however, increased its net debt to US$38.6 billion as of 31 March 2017, compared to US$30.0 billion a year ago, with gearing – that is net debt ratio - at 28.0 percent, compared with 23.6 percent a year ago. That’s closer to the upper end of BP’s target to keep gearing within the 20-30 percent range. Related: ‘’OPEC Has Failed’’
Looking ahead, BP provided its outlook for the second quarter, saying it expects production to be broadly flat with Q1, with ramp-up of major projects offsetting seasonal turnaround and maintenance activities. Improved industry refining margins are expected to be offset by both narrower North American heavy crude oil differentials and a higher level of turnaround activity in Q2 compared with Q1.
“The environment is still uncertain with factors at play such as OPEC’s decision on extending its production cuts and the level of tight oil production in the US. But overall we expect the market fundamentals, driven by above average demand, to support a continued rebalancing,” BP’s CFO Brian Gilvary said, commenting on BP’s expectations for the rest of the year.
By Tsvetana Paraskova for Oilprice.com
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