Oil giant BP sees its quarterly profits plunge

BP's profits slid 62 per cent in the first three months of the year on lower oil prices as demand for energy was hit by the world's recession. The company made $2.56bn in the quarter, down from $7.1bn the year before and said that the average price for oil over the period was $41.26 per barrel against $90.92 in the same three months in 2008. The price peaked in July last year at $147 per barrel.

Underlying profits were also down eight per cent compared to the last quarter of 2008 as the price of oil continued to slide. However the company was able to announce an increase in its dividend, partly as a result of the weakness of the pound. The pay-out rose 40 per cent to 9.584p per share.

BP is the second of Europe's major oil companies to report earnings after Italy's Eni said it made 43 per cent less profit in the first quarter. Royal Dutch Shell is expected to announce a 67 per cent drop in earnings tomorrow according to industry analysts.

As a result of the company's reduced profits it is thought it may scale back projects like its Canadian oil sands venture in line with other groups in the industry who are postponing plans and reducing investment.

Chief executive Tony Hayward has said the company will see its cashflow break even if the oil price averages $60 per barrel this year and in fact, despite the company's problems it still managed to increase production by four per cent in the quarter.

And it repeated its forecast that production volumes would increase over the course of the year. An increased pension charge hit the company in the period, with it paying out $368m compared to $246 a year ago.

WHAT THEY ARE SAYING
Robert Lea, Evening Standard: "The quarterly shareholder payout will total $2.61bn or more than 101 per cent of earnings. Big Oil is suffering not only from its commitments to shareholder payouts, but big capital expenditure plans and high costs from the last few years of the oil price boom at a time of plunging revenues." ·