BP profits jump 71% in Q1 2018 on rising oil prices

BP's Efforts to Get Back Among Big Oil's Elite Start to Pay Off

"Overall it was a very healthy set of results", said Martijn Rats, analyst at Morgan Stanley, which has a "neutral" recommendation on BP stock.

Reported oil and gas production was 3.7 million barrels of oil equivalent a day in the quarter, 6% higher than the first quarter of 2017.

Shareholders react positively to the highest profit in years even as the continuing burden of oil-spill payments push debt higher.

BP's underlying replacement cost profit, its definition of net income, rose 71 percent to $2.6 billion in the first quarter, exceeding the $2.2 billion forecast by analysts in a company-provided survey.

In the first three months of 2018, however, BP's debt rose to $40 billion due to the settlement of more lawsuits over the deadly 2010 Deepwater Horizon spill in the Gulf of Mexico which has cost it more than $65 billion.

During the quarter, BP completed another 200 million USA dollars (£146 million) worth of divestments as it continues to sell off assets, and kept its guidance for between 2 billion United States dollars (£1.5 billion) and 3 billion U.S. dollars (£2.2 billion) over the full year.

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Operating cash flow excluding payments made following the oil spill in the Gulf of Mexico stood at $5.4bn, including a $1.8bn negative impact from an increase in working capitals. Stripping those out, cash flow reached $7 billion in the quarter, the strongest since 2014.

In the first quarter, BP bought back 18 million shares worth $120 million.

BP said its upstream operations - which cover exploration and production - enjoyed the best quarter since the third quarter of 2014, with underlying profits more than doubling to $3.2bn (£2.3bn).

Though BP has worked through nearly all of the 390,000 legal claims stemming from the 2010 explosion, the bill for its remaining claims unexpectedly jumped late past year.

"Moving through 2018, we're determined to keep delivering our operational targets and maintaining capital discipline while growing cash flow and returns", Chief Executive Officer Bob Dudley said in a statement. The company paid out $1.6 billion on a pretax basis for the Deepwater Horizon disaster, including a final $1.2 billion payment to the U.S. Department of Justice. In total, payments are expected to total just over $3 billion in 2018. To pay for cleanup costs and legal fees, BP was forced to sell off billions of dollars in assets, dramatically shrinking the size of the company.

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