BP first quarter profits plummet in “challenging environment”

BP has reported its financial results for the first quarter of 2016 in the midst of a “challenging environment.”

The British multinational company, headquartered in London, reported an underlying replacement cost profit for the quarter of $532m (£367m), compared with $196m (£135m) for the previous quarter and $2.6bn (£1.8bn) for the first quarter of 2015.

Compared with the previous quarter, lower costs throughout BP more than offset the impact of significantly weaker oil and gas prices and refining margins.

Bob Dudley, BP group chief executive, said: “Despite the challenging environment, we are driving towards our near-term goal of rebalancing BP’s cash flows. Operational performance is strong and our work to reset costs has considerable momentum and is delivering results. Furthermore, development of our next wave of material upstream projects is well on track.

“Market fundamentals continue to suggest that the combination of robust demand and weak supply growth will move global oil markets closer into balance by the end of the year.”

BP announced an unchanged dividend for the quarter of 10% ordinary share, expected to be paid in June.

Underlying operating cash flow in the first quarter was $3bn (£2.07bn). This excluded $1.1bn (£758m) of payments related to the Gulf of Mexico oil spill which were offset by divestment proceeds of $1.1bn.

Operational performance continued to be strong with reliability of Upstream operated assets and refining availability both at 95%.

Organic capital expenditure in the first quarter was $3.9bn (£2.7bn) compared to $4.4bn (£3.03bn) in the first quarter of 2015. BP now expects total organic capital expenditure in 2016 to be around $17bn (£11.7bn) and, in the event of continued low oil prices, sees flexibility to move to $15-17bn in 2017.

Costs are also reducing; BP’s cash costs over the last four quarters were $4.6bn (£3.1bn) lower than in 2014. BP expects cash costs for 2017 to be $7bn (£4.8m) lower than for 2014.

Brian Gilvary, chief financial officer, said: “As we steadily take out more costs, the point at which we expect to be able to rebalance 2017 organic sources and uses of cash continues to move lower; we currently anticipate being able to achieve this at oil prices in the range $50-55 a barrel.

“This progress underpins our commitment to sustaining BP’s dividend as the first priority within our financial frame. Should prices remain low, we have the flexibility to adjust further within the financial framework.”