BP PLC was the latest big oil company to report a sharp increase in profit in the first quarter Tuesday, adding to optimism that the sector may have endured the worst of a dramatic slump in prices.
The British oil giant said it swung to a profit in the first quarter, benefiting from a roughly 60% increase in prices since the first quarter of 2016 and higher production volumes.
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The results are the latest in a flurry of positive earnings reports by the world's biggest oil companies, several of which have enjoyed their most successful quarter in more than a year. The sharp improvement in financial performance has left investors hopeful that the sector may be on the path to recovery after struggling to come to grips with a sharp drop in oil prices since the summer of 2014.
Last week, Exxon Mobil Corp. reported its best quarter since 2015. Chevron Corp. posted a profit of $2.7 billion, after reporting a loss for 2016 and France's Total SA said its profit surged 77% in the first three months of the year. Royal Dutch Shell PLC is due to report later this week.
BP said Tuesday its replacement cost profit--a number analogous to the net income that U.S. oil companies report--was $1.4 billion in the first quarter, compared with a loss of $485 million in the same period a year earlier.
The company's share price jumped 2.4% in early London trading as investors reacted positively to the results announcement.
The company's operating cash flow excluding payments related to the company's fatal Gulf of Mexico blowout in 2010 improved to $4.4 billion in the first quarter, helping the company maintain its dividend at 10 cents a share and reassuring investors, who received a jolt in February when the company said it would need oil prices to rise to $60 a barrel to break even this year.
That number is expected to drift lower to closer to $55 a barrel later this year, in line with the company's expectation that prices will remain under pressure, despite efforts by the Organization of the Petroleum Exporting Countries to curb output and boost prices.
BP sees oil trading at $50-$55 a barrel in 2017 and likely capped from rising much higher by stronger shale production in the U.S., Chief Financial Officer Brian Gilvary said.
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(END) Dow Jones Newswires
May 02, 2017 04:01 ET (08:01 GMT)