BP logos are seen at a BP petrol and diesel filling station southeast of London on June 15, 2020.
BEN STANSALL | AFP | Getty Images
LONDON — British energy major BP on Tuesday reported better-than-expected earnings for the first quarter, following a period of stronger commodity prices and a brighter demand outlook.
It comes as oil and gas majors seek to prove to investors that they have gained a more stable footing amid the ongoing coronavirus crisis.
BP’s first-quarter underlying replacement cost profit, used as a proxy for net profit, came in at $2.6 billion. That compared with a profit of $115 million in the fourth quarter and $791 million for the first quarter of 2020.
Analysts had expected BP to report first-quarter profit of $1.4 billion, according to Refinitiv.
The London-based energy giant said the result was driven by “exceptional” gas marketing and trading performance, “significantly” higher oil prices and stronger refining margins.
Net debt fell $5.6 billion to $33.3 billion at the end of the first three months of the year, meaning BP hit its target of reducing net debt to $35 billion. The company said it would 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 $500 million in the second quarter.
“Overall, a very strong quarter for the company,” BP CEO Bernard Looney told CNBC’s “Squawk Box Europe” on Tuesday.
“It has been a year of such uncertainty for the world and for the company. There have been many, many questions, of course, and that’s understandable but I think today’s results really answer many of those questions,” Looney said.
“It shows that it is possible to do two things at once. It is possible to deliver our shareholders with competitive cash returns and at the same time transition the company to a lower carbon future.”
Shares of BP are up more than 16% year-to-date.
The oil and gas industry was sent into a tailspin last year as the Covid-19 pandemic coincided with a historic demand shock, plunging commodity prices, evaporating profits, unprecedented write-downs and tens of thousands of job cuts.
BP reported its first full-year net loss in a decade in 2020 as the global health crisis took a heavy toll on its business operations, with Looney describing the 12-month period as the “toughest” of his career.
The energy company had previously warned of a tough start to 2021, with widespread travel restrictions still in place, but it had suggested the rollout of Covid vaccines should help to improve investor sentiment.
Oil prices have climbed around 25% since the start of the year, supported by the rollout of Covid vaccines and an improving economic outlook.
More recently, soaring Covid infections in India and an expected supply increase from producer group OPEC+ have added downward pressure to oil prices.
International benchmark Brent crude futures traded at $66.24 a barrel on Tuesday morning, up around 0.9% for the session, while U.S. West Texas Intermediate futures stood at $62.47, more than 0.9% higher.
Earlier this month, the International Energy Agency upgraded its oil demand forecast for 2021, saying market fundamentals appeared “decidedly stronger” when compared with April last year.
The Paris-based energy agency tempered its optimism for the year ahead, however, warning that “lingering concerns” persist over the strength of the demand recovery.