Despite Higher Profits, BP Disappoints With Q1 Cash Flow

Despite Higher Profits, BP Disappoints With Q1 Cash Flow

Underlying replacement cost profit for the first quarter of 2017 totaled $1.5 billion.

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

"But overall, a strong set of results in terms of earnings".

BP held out the prospect of a first dividend increase since 2014 on Tuesday, after first-quarter profits beat forecasts thanks to rising oil and gas prices and production.

BP has had a tougher going than its peers because of the multibillion-dollar bill it was saddled with after the Deepwater Horizon explosion in 2010 and the resulting massive oil spill in the Gulf of Mexico.

BP's solid first-quarter. The company expects its capital-expenditure budget to fall into the lower end of its guidance this year, estimated at around $15 billion. Dudley has cut costs and sold assets and BP has benefited from a partial recovery in the price of oil, which plunged from $110 a barrel in 2014 to less than $30 in early 2016 but has since rallied to more than $74 a barrel.

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Investors are looking closely at cash flow as an indication of Big Oil's ability to pass on the rewards of higher prices through share buybacks. Brent crude is now trading around $75 a barrel.

Revenues climbed 22pc to 68.1bn, boosted by a 6pc rise in production to 3.7m barrels per day after new oil and gas fields came online. BP started a record number of new projects around the world past year and is planning to begin production at six more in 2018, part of a plan to add 900,000 barrels a day of new production by 2021.

Though BP has worked through almost all of the 390,000 legal claims stemming from the 2010 explosion, the bill for its remaining claims unexpectedly jumped late past year. That included the final installment from a settlement with the Justice Department to resolve all criminal claims. Exxon Mobil Corp., Chevron Corp. and Royal Dutch Shell PLC posted their best first-quarter profits in years, but investors remained skeptical of companies that failed to meet expectations during three months when oil prices reached their highest level since 2014.

Gearing, the ratio of net debt to equity, was 28 percent, an increase from 27 percent in the fourth quarter of 2017, BP said.

It has so far cost the group more than 65 billion U.S. dollars (£48 billion), and although BP has all the major settlements now under its belt, it still has a few smaller legal bills to pay.

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