Oil major BP Plc reported a 62 percent fall in first-quarter net profit yesterday 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 net profit fell to US$2.39 billion from US$6.59 billion last year.
BP said it was reacting to the weaker oil price environment by slashing costs. These fell by US$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 US$50 world,” chief executive Tony Hayward said in an e-mail to staff seen by Reuters, referring to the current price of oil.
The Brent crude price averaged US$44 per barrel (bbl) in the quarter compared to US$97/bbl a year earlier and has since recovered to around US$50/bbl.
Lower industry costs will enable BP to cut its capital expenditure budget to under US$20 billion from the US$20 billion to US$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 because of 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).
It was the first time the company had topped the 4 million boepd level since the second quarter of 2006.
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.