BP Profit Falls in First Quarter but Beats Forecasts

Oil major BP reported a 62 percent fall in first-quarter net profit on Tuesday due to a collapse in oil and gas prices, but heavy cost cutting helped it beat all analysts' forecasts.

Europe's second-largest oil company by market value said its replacement cost (RC) net profit fell to $2.39 billion from $6.59 billion last year.

BP said it was reacting to the weaker oil price environment by slashing costs.

These fell by $1 billion in the first quarter compared to the same period last year.

"We need rapidly to bring our costs to a level that is compatible with a $50 world," Chief Executive Tony Hayward said in an email to staff seen by Reuters, referring to the current price of oil.

Pat Sullivan / AP

The Brent crude price averaged $44/bbl in the quarter compared to $97 per barrel (bbl) a year earlier and has since recovered to around $50/bbl.

Lower industry costs will enable BP to cut its capital expenditure budget to under $20 billion from the $20 billion to 22 billion BP said in February it expected to spend this year, a spokesman said.

The spokesman added that the company's lower capital expenditures were in small part due to delays in some projects.

BP's results were helped by a 2 percent rise in oil and gas production to 4.02 million barrels of oil equivalent per day (boepd), the first time the company topped the 4 million boepd level since the second quarter of 2006.

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However, BP's debt levels rose as it borrowed to fund its generous dividend.

Gearing rose to 23 percent compared with 19 percent last year.

BP needs oil prices of $60/bbl to generate enough cash to fund investment and pay its dividend, analysts said.

Excluding one-offs items, which amounted to a net charge of $194 million, the result was $2.58 billion, ahead of an average forecast of $2.28 billion from a Reuters poll of seven analysts.

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