BP's profits edge lower but beat forecasts

BP now plans an $8bn share buyback programme
Image caption BP is carrying out an $8bn share buyback programme

Oil giant BP saw profits edge lower in the first three months of the year.

Underlying replacement cost profit, which strips out the effect of oil price movements, was $4.2bn (£2.6bn) - down from $4.7bn for the same period a year ago.

However, the result beat analysts' forecasts of $3.27bn.

When the one-off gain from BP's sale of its interest in joint venture TNK-BP is included, the firm made $16.6bn in the quarter.

"These results represent a strong start to 2013 across all of our businesses," said BP chief executive Bob Dudley.

Asset sales

BP attributed the better-than-expected result to a greater share of new production coming on stream from major projects in Angola and the North Sea, helping to compensate for the production it has lost due to asset sales.

The company has been selling assets in order to raise funds to cover the costs arising from the Deepwater Horizon disaster.

The firm said the cumulative cost of the Gulf of Mexico spill, one of the worst environmental disasters in US history, remained at $42.2bn.

Underlying production of oil and gas, excluding the impact of asset sales, rose 2% in the quarter compared with the same period a year ago.

However, BP said that total oil and gas production was down 5% on a year earlier, primarily due to the sale of its stake in the TNK-BP Russian joint venture.

It also warned that production was likely to fall further in the second quarter of the year due to asset sales.

As well as the sale of its TNK-BP stake, BP also sold its Texas City refinery in the first quarter.

BP said its exploration projects remained on track, and it planned to drill 15 to 25 exploration wells by the end of the year.

BP is carrying out a share buyback programme - aimed at returning $8bn to shareholders over the next 12-18 months.

'Higher risk'

Societe Generale analyst Irene Himona said the results marked a strong quarter for BP, despite the fall in profit.

"It's a very good number. They beat consensus materially. So clearly a strong operational performance that's very encouraging."

However, Keith Bowman, analyst at Hargreaves Lansdown Stockbrokers, remained cautious.

"Underlying progress is being made. However, until the uncertainty of US legal settlement is lifted, BP remains a higher risk investment in a traditionally lower risk sector," he said.

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