BP 1Q profit is $2.56 billion, reversing 4Q loss

[April 28, 2009]  LONDON (AP) -- BP PLC, the second-largest European oil company, said Tuesday that it returned to profit in the first quarter, beating analysts' forecasts by earning $2.56 billion as oil prices recovered modestly and the company's refining and marketing business bounced back.

The first quarter net profit contrasted to a loss of $3.3 billion in the fourth quarter when BP, posting its first quarterly loss in seven years, was hit hard by falling oil prices. The first quarter profit was ahead of the analysts' consensus of $2.2 billion.

Still, the rebound left BP well below the $7.1 billion profit for the first quarter of 2008, when oil traded as high as $111.80 per barrel. It is currently selling for around $50 a barrel.

BP shares were down 0.4 percent at 481.25 pence on the London Stock Exchange.

"With a close eye on costs also, the company is improving operationally after a couple of years of perceived inefficiency," said Keith Bowman, analyst at Hargreaves Lansdown Stockbrokers.

"In addition, not only does the dividend yield look increasingly compelling, but the sustainability of the dividend is also becoming more evident," said Bowman, who rated the stocks as a "buy."

The company raised its quarterly dividend payment by 4 percent to $0.14 per share. For its British shareholders, that is a 40 percent gain because of the fall in the value of sterling.

Replacement cost profit -- a key measure for oil companies -- was $2.4 billion, down from $2.6 billion in the fourth quarter and far below the year-earlier result of $7.9 billion.

BP reported a profit of $4.3 billion in its exploration and production division, down from $4.8 billion in the fourth quarter and 62 percent below the year-ago result.

Pretax profit from refining and marketing was $1.4 billion, versus a loss of $8.1 billion in the fourth quarter.

"U.S. refining margins returned to a modest premium relative to other regions and the unusual adverse impacts from prior-month pricing of domestic pipeline barrels, that impacted our fourth-quarter results, were not repeated," the company said.

In other regions, the company said there was no repeat of the currency fluctuations which hit fourth-quarter results.

"BP looks to be ahead of the curve in terms of delivering cost savings," said Tony Shepard, analyst at Charles Stanley & Co.

"BP began to take action on its cost base in 2008 and based on actions already taken, and the deflation entering the supply chain, the cost base should fall by about $2bn this year," Shepard added.

Peter Hitchens, analyst at Panmure Gordon & Co., said he remained cautious about BP shares.

"Although the company pays an attractive yield of approximately 8.1 percent, we believe that the current operating environment will not allow any growth in this dividend and that that there could well be some concerns over a weakening balance sheet," Hitchens said.

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On the Net: http://www.bp.com/

[Associated Press; By ROBERT BARR]

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