BP triples first-quarter profit to $2.6 billion on strong oil, gas trading

Oil major BP has tripled its quarterly profit due to exceptional gas marketing, significantly higher oil prices, and higher refining margins.

BP on Tuesday posted an underlying replacement cost profit for the first quarter of $2,63 billion, a significant rise when compared with $0.8 billion for the same period in 2020.

According to the company, this result was driven by an exceptional gas marketing and trading performance, significantly higher oil prices, and higher refining margins.

BP’s operating cash flow of $6.1 billion was underpinned by strong business performance, with a working capital build of $1.2 billion including $0.5 billion of severance payments. This build was largely offset by other timing differences.

Divestment and other proceeds were $4.8 billion in the quarter, including $2.4 billion from the divestment of a 20 per cent stake in Oman Block 61 and $1.0 billion final instalment for the sale of the petrochemicals business to Ineos.

Net debt was reduced by $5.6 billion to reach $33.3 billion at the end of the quarter. Having reached $35 billion net debt, BP said that it was now retiring this target and was committing to maintaining a strong investment-grade credit rating.

In addition, BP remains committed to returning at least 60 per cent of surplus cash flow to shareholders through share buybacks, subject to maintaining a strong investment-grade credit rating.

In considering the quantum of buybacks, the board will take account of the cumulative level of, and outlook for, surplus cash flow to guide on a quarter-forward basis while macro uncertainties remain.

During the first quarter, BP generated a surplus cash flow of $1.7 billion after having reached its net debt target of $35 billion. During the second quarter, cash flow is expected to be impacted by the $1.2 billion pre-tax annual the Gulf of Mexico oil spill payment and further severance payments. As a result of these factors, BP expects a cash flow deficit in the second quarter.

Bernard Looney, CEO of BP, said: “This quarter demonstrates what we mean by performing while transforming. With the acceleration of divestment proceeds, together with strong business performance and the recovery in the price environment, we generated strong cash flow and delivered on our net debt target around a year early.

“We are commencing share buybacks in the second quarter which, alongside our resilient dividend, support the growth in distributions to shareholders. And at the same time, we’ve delivered disciplined strategic progress right across bp – including building a high-quality offshore wind business, making great strides in our electrification agenda and setting ourselves up for further growth in the Gulf of Mexico”.

In April in the Gulf of Mexico, the Argos platform for bp’s Mad Dog 2 development arrived, on track for start-up in 2022, and BP announced the high-quality Puma West oil discovery.

Another highlight of the quarter was the start of production from two new gas projects – Raven in Egypt and the Satellite Cluster in India.

The company also agreed to acquire a stake alongside Daimler and BMW in Digital Charging Solutions, a developer of digital charging software, and BP Pulse announced the rollout of new EV-only ultra-fast charging hubs across the UK.

BP and EnBW were selected as preferred bidders for UK offshore wind leases and the company also completed the formation of its US offshore wind partnership with Equinor. Also worth noting, BP announced plans for the UK’s largest blue hydrogen production facility in Teesside.