BP today reported its results for first quarter of 2015. Underlying replacement cost profit (see Note 1) for the quarter was $2.6 billion compared with $3.2 billion for the same period in 2014 and $2.2 billion for the fourth quarter of 2014.
“We are resetting and rebalancing BP to meet the challenges of a possible period of sustained lower prices. Our results today reflect both this weaker environment and the actions we are taking in response,” said Bob Dudley, BP group chief executive. “We are continuing to progress our planned divestment programme, we are resetting our level of capital spending, and we are addressing costs through focusing on simplification and efficiency throughout BP.”
Oil and gas prices in the quarter were sharply lower than a year earlier. Brent crude averaged $54 per barrel compared with $108 in 1Q 2014. This was the lowest quarterly average Brent price since 1Q 2009. The Henry Hub gas marker price averaged $2.99 per million British Thermal Units, 40% lower than a year earlier.
BP remains on track to divest a further $10 billion of assets by the end of 2015. This total has now reached $7.1 billion, including the agreement to sell BP’s interest in the CATS business in the UK North Sea, announced last week.
Organic capital expenditure in the first quarter was $4.4 billion and Dudley confirmed BP’s reset expectation of $20 billion total organic capital expenditure for 2015. “We will also look to take advantage of any opportunities presented by the lower price environment to further reduce capital expenditure or costs,” he added.
Operating cash flow for the quarter was $1.9 billion compared with $8.2 billion a year earlier. The quarter’s operating cash flow included a working capital build of $2.5 billion. At the end of the quarter BP’s net debt was $25.1 billion, equivalent to a gearing level of 18.4%.
BP today announced a stable quarterly dividend of 10 cents per ordinary share, expected to be paid in June. Dudley said: “The dividend is the first priority within our financial framework and the board is committed to maintaining it, as we have today. We can sustain this by successfully resetting our capital and cost base and rebalancing our sources and uses of cash in the prevailing oil price environment. We will continue to review progress on this as we move through the year.”
BP’s Upstream segment reported underlying pre-tax replacement cost profit of $0.6 billion for the first quarter of 2015 compared with $4.4 billion for 1Q 2014. The result included a $545 million loss for BP’s US Upstream business.
As expected, the Upstream result was significantly affected by lower oil and gas prices as well as weaker gas marketing and trading and $375 million costs associated with the cancellation of contracts for two deepwater rigs in the Gulf of Mexico no longer required for BP’s reset drilling programme. This was partly offset by the positive impacts of higher oil and gas production, lower exploration write-offs, and also cost benefits from simplification and efficiency work throughout the segment.
Overall Group oil and gas production, including Russia (see Note 2), was 3.3 million barrels of oil equivalent a day (mmboe/d). Excluding Russia, reported Upstream production of 2.3 mmboe/d was 8.3% higher than a year earlier and underlying production (see Note 3) 3.7% higher. Production increases were primarily due to the ramp up of production from new projects in key regions.
Underlying pre-tax replacement cost profit for BP’s Downstream segment was $2.2 billion for the quarter, compared with $1.0 billion in 1Q 2014. The result reflects the stronger overall refining environment, increased refining optimisation and production, and improved marketing performance. There was also a stronger contribution from supply and trading than a year earlier. Simplification and efficiency programmes also contributed to lower costs in the Downstream.
Estimated underlying net income from Rosneft (see Note 2) was $183 million compared with $270 million in 1Q 2014.
BP’s first quarter result included a one-off, non-cash, deferred tax credit as a result of the reduction in the rate of the UK North Sea supplementary charge, announced in March; the opposite effect was reported in 2011 when the supplementary charge was increased.
The quarter’s result also included a further $215 million non-operating restructuring charge; bringing total restructuring charges to $648 million compared with an estimated total of $1.0 billion BP expects to take before the end of 2015.
In the first quarter BP announced the Atoll gas discovery and also signed final agreements for the major $12 billion West Nile Delta gas project, both offshore Egypt. The new advanced technology purified terephthalic acid (PTA) plant in Zhuhai, China – which will add over one million tonnes a year of PTA capacity with an advantaged cost position – started up in March.
At the end of the quarter the total cumulative pre-tax charge for the Gulf of Mexico oil spill was $43.8 billion. An additional charge of $332 million was taken in the quarter due mainly to additional business economic loss claims. This overall charge does not include any provision for business economic loss claims that are yet to be received, processed or paid (except where an eligibility notice has been issued and is not subject to appeal by BP within the claims facility).
At the end of the quarter the aggregate remaining cash balance in the Trust and qualified settlement funds was $4.3 billion.
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