Oil giant BP said yesterday that first-quarter profits slid 62% year-on-year after oil prices slumped from last summer’s record high.
The decline to £1.64billion – expressed as replacement-cost profits, which strip out gains or losses on the value of inventories – in the first three months of 2009 came as global oil prices dived below $50 a barrel, compared with the peak of $147 last July.
BP, which last year reported record annual profits of £18.1billion, said profits more than halved at its exploration and production division.
A year ago, BP and rival Royal Dutch Shell reported first-quarter results on the same day and fuelled motorists’ anger over rising petrol prices by reporting a combined surplus of more than £7billion.
Yesterday’s update from BP was still stronger than market expectations, with the surplus, excluding one-off items, coming in at £1.76billion.
There was further cheer for shareholders as BP announced a 4% increase in the company’s dividend payment. Analysts have expressed concern in recent months that, with oil prices falling, the company may be forced to stall dividend growth.
The group has shown signs of operational improvements in refining while in the exploration and production division output was 2.6% higher than a year ago at an average of 4.02million barrels of oil equivalent per day.
It said this reflected a ramp-up in production from major projects started in 2008, although it added that the actual rate of growth would depend on factors such as oil prices and their impact on export cartel Opec’s quota restrictions.
BP has also boosted efficiency after chief executive Tony Hayward’s appointment in 2007. BP shed 3,000 staff in 2008 and expects to axe more than the 5,000 posts originally planned by the middle of this year.
Analyst Tony Shephard, at broker Charles Stanley, said the first-quarter performance was impressive.
He said: “Operationally, these were good results with a better-than-expected outcome in the two main divisions, and BP looks to be ahead of the curve in terms of delivering cost-savings.
“A challenge for all oil and gas companies is to reduce operating costs because although the oil price has fallen back to 2004 levels, industry costs have doubled since 2004.
“BP began to take action on its cost base in 2008 and based on actions already taken, and the deflation entering the supply chain, the cost base should fall by about £1.37billion this year.”
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