BP's profits halved to $1.6bn

Paul Armstrong12 April 2012

OIL GIANT BP unveiled a 57% crash in first-quarter profits today but shares in the company rallied as investors breathed a sigh of relief that the result was not even worse.

Lower oil prices and weak petrol margins restricted BP to a profit of $1.6bn (£1.09bn) compared with $3.7bn at the same time last year and $1.8bn in the final quarter of 2001.

However, analysts said earnings from the chemicals division, where the company has slashed costs, and a fall in the interest bill, were both more favourable than expected, triggering a 15p rise in BP shares to 584p.

'These are solid figures that will help restore confidence in the sector,' said Commerzbank analyst Steve Turner. 'There has been a big sigh of relief.'

BP also continued its attack on the Government over the increased North Sea tax announced in the Budget, saying the changes would cost it about $200m this year based on oil prices of the first quarter. It would also incur a one-off charge of about $350m to cover its deferred tax position.

Chief executive Lord Browne said refining and marketing, which includes petrol forecourts, had been hit by the poorest trading environment for a decade, and chemicals margins remained depressed.

But sharply lower oil prices were mainly to blame for the collapse in year-on-year profits, though a post-Christmas rise in Brent, fuelled by Middle East tension and hopes of a US economic-recovery, saw profits from the exploration and production division edge up to $2.4bn from $2.37bn in the final quarter of last year.

BP said production was up 0.75% in the quarter, leaving it on course to reach its annual goal of a 5.5% gain, despite the impact of a warm UK winter, Opec cutbacks on the company's production and the sale of some North Sea assets.

Profits from chemicals soared from $39m to $108m as higher volumes more than offset a drop in margins. But the contribution from refining and marketing crashed from $785m in the final quarter of last year to $287m in the latest three months as margins were squeezed further by BP's inability to pass on its higher costs.

Global refining margins were down 80% compared with the previous quarter, though BP cut operating costs, partly through cheaper electricity in the US. The interest bill came down from $414m in the previous quarter to $333m.

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