BP posts first quarter adjusted net income of $791 million

BP PLC reported adjusted net income of $791 million for first-quarter 2020. Upstream adjusted income for the quarter was $1.871 billion compared to $2.7 billion in fourth quarter 2019 and $2.9 billion in 2019’s first quarter.

BP reported an underlying replacement cost profit of $800 million for this year’s first quarter compared with $2.4 billion for the same period a year earlier. The result reflected lower prices, demand destruction in the downstream particularly in March, a lower estimated result from Rosneft and a lower contribution from oil trading. It was also impacted by $200 million non-cash underlying foreign exchange effects (FX) in other businesses and corporate, including FX translation impacts of finance debt in the BP Bunge Bioenergia joint venture.

Replacement cost loss for the first quarter was $600 million compared with a profit of $2.1 billion for the same period a year earlier, including a $1.4 billion net adverse impact of non-operating items and fair value accounting effects.

Inventory holding losses of $3.7 billion, as a result of the dramatic drop in oil prices at the quarter end, were the main driver of the reported historical cost loss of $4.4 billion.

Operating cash flow for the first quarter, excluding Gulf of Mexico oil spill payments, was $1.2 billion, including a $3.7 billion working capital build (after adjusting for net inventory holding losses) driven by higher downstream product balances and trading mark-to-market receivable balances at the end of the quarter. Gulf of Mexico oil spill payments in the quarter were $300 million on a post-tax basis.

Receipts from divestments and other proceeds were $700 million in the first quarter.

Net debt at the end of the quarter was $51.4 billion, $6.0 billion higher than a quarter earlier.  The company had $32 billion of liquidity available at the end of the quarter.

Production for the quarter was 2.579 MMboe.

For 2020, the company reduced its group capital expenditure guidance to $12 billion, a 25% decrease from original guidance (OGJ Online, Apr. 1, 2020).

In the upstream segment, capital reductions include delaying exploration and appraisal activities, curtailing development activities in lower margin areas, as well as rephasing or minimizing spend on projects in the early phases of development. Underlying production in 2020 is expected to be reduced by around 70,000 boe/d on an annual basis as a result.

COVID-19 is slowing progress on some projects and the Tangguh expansion start-up will be delayed, Jefferies analysts reported in an investor note following the report release.