bp has sent out a strong recovery signal after recording $3.3 billion replacement cost profit in the first quarter and announcing it has met its $35 billion net debt target.
Total reported profit for the quarter was $4.7 billion, a marked improvement on the $1.4 billion recorded in Q4 2020, and underlying replacement cost profit was $2.6 billion ($0.1 billion for previous quarter), fuelled by "exceptional" gas marketing and trading, and higher oil prices and refining margins.
Divestment and other proceeds were $4.8 billion in the quarter, including $2.4 billion from the sale of a 20% stake in Oman Block 61 and $1 billion final instalment for the sale of the petrochemicals business, as the oil major continues to transform itself into an "integrated energy company" and develop low-carbon energy.
Replacement cost profit before interest and tax for the first quarter for gas and low-carbon energy was $3,430 million, compared with $1,070 million for the same period in 2020. The quarterly update contrasted with the figures unveiled in February when bp announced an $18.1 billion loss - although even then, there were signs of a revival.
Capex in Q1 was $3.8 billion, consistent with the $3.9 billion spend in the first quarter 2020 and higher than the $3.5 billion in Q4 2020. This includes payments of $0.7 billion following completion of the formation of the offshore wind joint venture with Equinor and a $0.3 billion payment in connection with its share of UK offshore wind leases in partnership with EnBW.
Net debt was cut by $5.6 billion to $33.3 billion, meeting its $35 billion target, and it will undertake $500 million share buybacks in the second quarter.
However cash flow is expected to be impacted by the $1.2 billion pre-tax annual Gulf of Mexico oil spill payment, further severance payments and a smaller improvement in realized refining margin in Q2. Other blips were the 45% drop in demand for aviation fuel and 9% drop in year-on-year demand for retail fuels.
CEO Bernard Looney said with the acceleration of divestment proceeds, together with strong business performance and the recovery in prices, bp generated $11 billion cash flow. "At the same time, we’ve delivered disciplined strategic progress right across bp – including building a high-quality offshore wind business, making great strides in our electrification agenda and setting ourselves up for further growth in the Gulf of Mexico," he said.
- Oil production & operations in April in the Gulf of Mexico, the Argos platform for bp's Mad Dog 2 development arrived, on track for start-up in 2022, and bp announced the high-quality Puma West oil discovery.
- Customers & products bp agreed to acquire a stake alongside Daimler and BMW in Digital Charging Solutions, a leading developer of digital charging software, and bp pulse announced the roll out of new EV-only ultra-fast charging hubs across the UK. bp also added further strategic convenience sites* to its network during the quarter.
- Gas & low carbon energy bp and EnBW were selected as preferred bidder for UK offshore wind leases and bp completed formation of its US offshore wind partnership with Equinor; bp announced plans for the UK's largest blue hydrogen production facility in Teesside and is targeting 1GW of blue hydrogen production by 2030; and the start of production from two new gas projects – Raven in Egypt and Satellite Cluster in India – was announced in April.