BP 1st-Quarter Profit Jumps 52%

BP, the third-biggest publicly traded oil company, reported a 52% jump in first-quarter profit because of soaring U.S. natural gas prices and better margins from refining.

BP also benefited from its gas-rich acquisitions of U.S. companies Amoco Corp. and Atlantic Richfield Co.

Oil and gas production growth, however, remains a tough challenge for BP.

Profit rose to $4.13 billion, or 18 cents a share, from $2.71 billion, or 14 cents a year earlier, based on accounting that removes one-time items and assumes oil supplies can be replaced at current costs. The results marked BP’s seventh straight quarterly record.

The profit did not beat expectations of $3.56 billion to $4.23 billion set by analysts after forecast-beating quarters from Exxon Mobil and Royal Dutch/Shell.

“I sense a tinge of disappointment,” said Merrill Lynch analyst Jon Wright.

“Everyone has bought BP for its U.S. exposure. It’s delivered on that . . . but not as much as people had hoped, and now the U.S. environment is easing; refining margins are coming back, gas prices are easing off.”

BP’s American depositary receipts fell 51 cents to close at $51.49 on the New York Stock Exchange.

BP said its oil and gas production was little changed in the latest quarter from a year ago, when measured on a “consistent” basis. Including Arco, gas production rose 41%, while that of crude oil declined 2.2%.

Chief Executive John Browne said BP is on track to achieve its target of growth in oil and gas output of between 5.5% and 7%.

“The trading environment remains broadly positive in spite of the slowdown in the world economy,” Browne said. “Oil and natural gas prices have fallen back from peak levels, but both are expected to remain firm.”

Analysts believe that the acquisitions of Arco and Amoco, made in the last two years in a much lower price environment, are looking more shrewd as the focus of strong prices remains in the U.S.

BP said its first-quarter profit from finding and producing oil and natural gas spurted 59% to $5.1 billion. The firm is the largest natural gas producer in North America.

Earnings from making and selling fuels jumped 70% to $994 million, BP said. Profit margins from refining will probably stay “relatively strong,” Browne said.

Profit at BP’s chemicals division dropped 69% to $81 million, and margins will probably stay “under pressure,” Browne said. The gas and power unit’s profit declined 21% to $112 million.

BP’s profit is calculated on a replacement cost basis, taking into account the cost of replacing the company’s oil reserves at current prices and stripping out exceptional items.

The figure excludes costs for goodwill resulting from acquisitions, such as BP’s $33.1-billion purchase of Arco.

The company will pay a quarterly dividend of 5.25 cents a share.