Why BP's Profits Are Falling

BP may be one of the most formidable oil companies in the world, though according to the latest figures, profits are falling amid weakness in global oil prices. A statement from the FTSE 100 energy giant confirmed that the first quarter of 2019 has been a "volatile period" which resulted in the January-March replacement cost profit measure of £1.6 billion being around 12% less than 2018's figure.

Brent crude slump triggers BP losses

The slump was triggered by a drop in the price of Brent crude which saw barrels selling around US$50 at the end of last year. While the resource recently rallied and hit highs of US$75 in April it couldn't save BP from reporting the lowest quarterly profits seen since the close of 2017.

While some analysts see the slowdown as a negative, BP chief executive Bob Dudley maintains the £1.6 billion replacement cost profit figures confirm the company's strength and ability to generate "resilient earnings and cash flow through a volatile period that began with weak market conditions." He also refers to the company's recent success which saw a spike in crude oil prices double annual profits in 2018.

Egyptian interests set to boost net production

Dudley asserts that instead of continuing to lag in 2019, BP will ramp up oil and gas output in the wake of its recent purchase of US fracking assets. The company has raised cash by selling off interests in Gulf of Suez producing and exploration concessions to Dubai-based company, Dragon Oil. The deal is set to be pushed through in the second half of 2019 and is part of the company's plan to sell around £8 billion of global assets over the next 24 months.

Hesham Mekawi, regional president for BP North Africa says the move will "continue to bring on new developments and deliver important gas supplies for the country" and help BP reach its target of tripling 2016 Egyptian net production by 2020. "As we grow our business here, we also keep our portfolio under review. We believe Dragon Oil is well-placed to operate these mature assets, delivering further value for Egypt,” he adds.

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