BP’s shares rose about 2% but were still down by 11% this year. The oil and gas company joined oil major rivals including Exxon Mobil, Chevron and Total in posting stronger-than-expected quarterly earnings, mostly thanks to higher oil and gas prices.
Oil prices rose by 50% in the past year to around $54 a barrel in the first quarter.
BP expects prices to average between $50 and $55 a barrel in 2017, heading to the higher end of the range if the Organization of the Petroleum Exporting Countries (Opec) and major producing countries extend production cuts into the second half of the year, chief financial officer Brian Gilvary said.
The results could assuage some concerns among investors, who were jolted when BP in February raised the oil price at which it could balance its books this year to $60 a barrel after a string of investments that pushed up borrowing.
Three years since oil prices slumped from above $100 a barrel and after BP slashed costs with lay-offs and project delays, investors want to see cash generation to cover spending and dividend payouts, while reducing ballooning debt.
“The results are positive,” Cenkos Securities analysts wrote, but added that “gearing is creeping up towards the max of the 20% to 30% target range, although divestments, including the recent $1.7bn Secco sale in China, should help”.
Net debt rose 9% in the quarter to $38.6bn (€35.4bn), lifting BP’s gearing of net debt to shareholders’ equity from 26% to 28%, closer to its ceiling of 30%.
“The debt was always going to rise in the first half of the year and the 28% gearing, frankly, that doesn’t cause any problems at all,” Mr Gilvary said.
To keep oil prices buoyant, oil companies want Opec, Russia, and other producers to extend their pact to reduce production for another six months from June 30.
“If they don’t get rolled into the second half of the year we will continue to see more [price] volatility,” Mr Gilvary said.
BP is set to start up seven projects this year, including in Oman and Azerbaijan, the largest number in a single year in BP’s history.