There’s nothing like high prices to bring a lot of green to the balance sheets of oil companies and a smile to the faces of their executives.
We saw last week that local oil majors Woodside and Santos did a lot better with higher sales and revenues in the three months to March, courtesy of higher prices for oil and gas (oil prices were up around 20% in the March quarter).
Those higher prices and cost savings saw BP report on Tuesday a sharp jump in first quarter earnings that was well above market forecasts.
Earnings after taxation hit $US4.7 billion in the three months to the end of March, BP said in the March quarter’s results statement.
That contrasted sharply with a net loss of $US4.4 billion in the same period last year when coronavirus had savaged oil demand and prices.
The company, whose performance was also boosted by a series of asset sales, added that it would begin share buybacks in the next quarter.
On an underlying replacement cost profit, (its version of net profit on a replacement cost basis), earnings came in at $US2.6 billion.
That compared with a profit of $US115 million in the fourth quarter and $US791 million for the first quarter of 2020. Analysts had forecast a figure around $US1.4 billion so it was a considerable ‘beat’ by the company.
BP lost $US20.3 billion over 2020.
BP said the sharp improvement was driven by “exceptional” gas marketing and trading performance, “significantly” higher oil prices and stronger refining margins.
This beat points to better outcomes to be reported later this week by the likes of Shell, Exxon Mobil and Chevron.
Net debt fell $US5.6 billion to $US33.3 billion at the end of the first three months of the year, meaning BP hit its target of reducing net debt to $US35 billion.
BP says it will now retire this goal, subject to maintaining a strong investment grade credit rating.
Looking ahead, BP said it intends to resume share buybacks at a cost of around $US500 million in the (current) second quarter.
BP warned that results in the current second quarter won’t be as positive as in the three months to March.
The company expects cash flow to be impacted by a $US1.2 billion pre-tax annual Gulf of Mexico oil spill payment, further severance payments and a smaller-than-expected improvement in refining margins.
As a result, BP said it anticipated a cash flow deficit in the second quarter.
Looking to the rest of 2021, BP said that “Oil demand is expected to recover in 2021 due to strong growth in US and China and as the distribution of vaccinations gains momentum and lockdown restrictions are gradually lifted.”
“OPEC+ behaviour is a key factor in oil prices and market rebalancing,” it added.
The results were published on the eve of an output meeting to discuss production by OPEC and its allies.
