BP’s profit tripled in the first quarter of 2017

British Oil and Gas Company

The British oil and gas company joined oil major rivals including Exxon Mobil, Chevron and Total. They joined in posting stronger than expected quarterly profits,  mostly thanks to oil and gas prices.

BP’s profit nearly tripled in the first quarter of 2017 from a year earlier. Inspired by rising oil prices and production that hit a five-year high. While debt stacked up in order to pay for acquisitions and costs for the 2010 Gulf of Mexico spill.

Oil prices rose by 50 percent in the past year to around $54 a barrel in the first quarter.

BP’s expectations

BP expects prices to average between $50 and $55 a barrel in 2017, heading to the higher end of the range. If OPEC and major producing countries extend production cuts into the second half of the year.

The results could calm some concerns among investors. Who were shaked up when BP in February raised the oil price. They rose it to a level at which it could balance its books this year. To $60 a barrel after a string of investments that pushed up borrowing.

BP’s shares were trading 2.4 percent higher at 0721 GMT, the biggest winner on London’s bluechip FTSE 100 index.

• “The results are positive,” but “gearing is creeping up towards the max of the 20-30 percent target range. Although divestments, including the recent $1.7 billion SECCO sale in China, should help.” (Reuters)

Net debt rose 9 percent in the quarter to $38.6 billion. Rising BP’s grab of net debt to shareholders’ equity from 26 percent to 28 percent. Which is obviously closer to its ceiling : 30 percent.

“The debt was always going to rise in the first half of the year and the 28 percent gearing, frankly, that doesn’t cause any problems at all.” (Reuters)

To keep oil prices buoyant, oil companies want the OPEC, Russia and other producers to extend their global pact to cut  for 2H17 from June 30.

”If they don’t get rolled into the second half of the year, there will certainly be more price volatility.”

London-based BP

London-based BP is set to start up seven projects this year. Including Oman and Azerbaijan, the largest number in a single year in company’s history. It hopes to add 800,000 bpd of new production by the end of the decade.

The renewal of BP’s ADCO onshore oil concession in Abu Dhabi in December was a main contributor to BP’s first quarter rise in output. Total upstream production, excluding BP’s share of Rosneft output, reached a five-year high of 2.39 million bProjects under construction are ahead of schedule and on average 15 percent below budget, BP said.

BP’s operating cash flow in the quarter rose to $2.1 billion from $1.9 billion a year earlier, hit by payments made toward settling fines related to the 2010 deadly Deepwater Horizon rig explosion and oil spill in the Gulf of Mexico.

BP took a pre-tax $161 million charge in the first quarter related to the spill. Total payments are expected to reach $4.5 billion to $5.5 billion this year.

BP reported first-quarter underlying replacement cost profit, the company’s definition of net income, of $1.51 billion, exceeding analysts’ average forecast of $1.26 billion.