Oil giant BP’s profits dipped by much less than expected in Q1, beating forecasts substantially.
Analysts thought that the sliding price would cut profits to as low as $US1.28 billion (£839 million), but BP surprised with a $US2.58 billion (£1.69 billion) earnings announcement.
That’s still well down from the $US3.22 billion (£2.11 billion) reported in the first quarter of 2014, but a fall was expected given the sudden plunge in the price of oil at the end of last year.
The company reports its earnings in terms of “underlying replacement cost profit” — that’s an oil industry term which reports earnings in terms of the cost to the firm if the barrels they’re selling were replaced at today’s price.
That way of reporting reduces profits when oil prices spike, and maintains them when prices slump. Because of this, the figures probably under-represent BP’s losses in the first quarter.
The results state just how much lower oil prices
Oil and gas prices in the quarter were sharply lower than a year earlier. Brent crude averaged $US54 per barrel compared with $US108 in 1Q 2014. This was the lowest quarterly average Brent price since 1Q 2009. The Henry Hub gas marker price averaged $US2.99 per million British Thermal Units, 40% lower than a year earlier.
BP CEO Bob Dudley said the firm is trying to adjust to “the challenges of a possible period of sustained lower prices”.