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BP announce Q1 results

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Announcing their Q1 results BP have argued that “Underlying replacement cost profit for the quarter was $4.2 billion, compared to $3.9 billion in the fourth quarter and $4.7 billion in the first quarter of 2012″.

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Operating cash flow in the quarter was $4.0 billion, compared with $3.4 billion in the first quarter of 2012. BP announced a quarterly dividend of 9 cents a share, to be paid in June.

Bob Dudley, BP Group Chief Executive, said that these were “strong first quarter results demonstrate the progress BP is making in delivering the performance milestones that support our 10-point plan and underpin our commitment to material operating cash flow growth by 2014.

“The early completion of the sale of our interest in TNK-BP has also allowed us to begin a share buy-back programme which we expect to return up to $8 billion to our shareholders and reflects the reduction in BP’s asset base following our divestment programme over the past three years.”

The buy-back programme is expected to be executed over 12-18 months. As of 26 April, BP had bought back 120 million shares for a total amount of $834 million, including fees and stamp duty. BP intends to retain the balance of the cash received from the TNK-BP transaction to reduce net debt as part of its commitment to maintaining a strong balance sheet.

BP have also completed the sale of its interest in TNK-BP to Rosneft on 21 March, for a total consideration of $27.5 billion in cash and Rosneft shares. BP now holds a total 19.75% interest in Rosneft. The 11 days of earnings from Rosneft in the first quarter of 2013 is estimated at $85 million.

The gain on the disposal was $15.5 billion, of which $12.5 billion was recognised and reported as a non-operating item in the first quarter. $3.0 billion of the gain was deferred and will be released to the income statement over time.

Largely as a result of the Russia transaction, net debt at the end of the first quarter fell to $17.7 billion, equivalent to a gearing level of 11.9%, in the lower half of BP’s 10-20% target range.

In BP’s upstream business, underlying production of oil and gas — adjusted for the impact of divestments and production sharing agreement effects, and excluding TNK-BP and Rosneft — was over 4% higher than in the previous quarter as production ramped-up from major projects in high-margin areas – Angola and the North Sea. Compared with a year earlier, underlying production was around 2% higher.

Reported production of oil and gas excluding TNK-BP and Rosneft was 2.33 million barrels of oil equivalent a day, around 2% higher than the fourth quarter, but 5% lower than the same period in 2012, primarily due to divestments. Following the Rosneft transaction, total oil and gas production for the Group is over three million barrels of oil equivalent a day.

Reported production in the second quarter is expected to be lower as a result of planned seasonal turnaround activity concentrated on higher-margin assets in the Gulf of Mexico and the North Sea, together with the ongoing impact of divestments.

BP’s downstream business benefited from a strong contribution from supply and trading operations in the quarter. Good operational performance in the fuels business, with refinery availability over 95%, enabled the benefits of the favourable refining environment to be captured, particularly in the US Mid-West. This was partially offset by the continued planned outage of the largest crude unit at the Whiting refinery as part of the refinery’s modernisation project. The full project is expected to come on stream as planned in the second half of this year.

Lubricants continued to deliver strong performance with pre-tax profit slightly ahead of both the prior quarter and the same period a year ago, but petrochemicals margins and volumes remained weak.

BP argue that they remain on track for the start-up of four new upstream projects in 2013 and expects to take five final investment decisions during the year. BP expects to drill between 15 and 25 exploration wells by the end of the year, eight of which are currently in progress, including wells in Egypt, India, Jordan, Gulf of Mexico, and Indonesia.

In addition to the sale of BP’s interest in TNK-BP, the divestment of the Texas City refinery and related assets was completed in the first quarter.

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