BP rides crest of oil price wave

RECORD profits from oil giant BP this morning will add to motorists' anger at the level of petrol pump prices.

Soaring oil prices pushed the world's second-largest oil company to a profit of $4.95bn (£2.59bn) in the first quarter of the year, equivalent to £1.3m an hour.

The figures easily beat analysts' forecasts and are likely to herald bumper profits from the rest of the oil sector which reports later this week.

BP's surging profits were boosted by a leap in the exploration and production business as well as a 54% improvement in BP's refining and marketing business. Refining margins were strongly ahead, making up for lower margins at the petrol pumps, where prices have gone up at a slower rate than the headline crude oil price.

Motorists looking for some respite from higher petrol prices may wait in vain. Analysts believe that strong global demand for oil, particularly from China where rapid industrialisation is in progress, will continue unabated.

Indeed, BP appears to be on the crest of a wave, with the price of crude showing no signs of slacking and growing speculation of further substantial increases as oil-producing countries struggle to keep up with demand. Oil prices averaged $47.9 a barrel during the three months to the end of March, up 52% on the same period last year.

BP chief executive Lord Browne, who earned £5.65m last year, making him Britain's highest-earning listed company boss, said the figures reflected a huge investment programme over the past few years. He added: 'Continuing higher oil prices have generated substantial additional cash flow which has been applied to the share buyback programme.'

The group spent $2bn buying back some 193m of its own shares during the quarter. The record amounts of cash flowing into the company - $9.4bn in the quarter ? means that investors will get a 17% lift in their quarterly dividend to 4.45p. In dollar terms, the dividend is up 26% to 8.5 cents from the 6.75 cents paid out this time last year.

Today's results are the first BP has reported under new International Financial Reporting Standards, introduced to bring more conformity between US and European accounting rules.

BP's headline profit of $6.6bn included a one-off exceptional profit of $535m from the sale of BP's interests in the Ormen Lange gas field in the North Sea and the UK Interconnector gas pipeline. Separately, the company said the financial consequences of the major fire at its refinery in Texas City would be minimal.

There was no comment this morning on the prospects for BP's joint venture in Russia, TNK-BP, currently the subject of investigations by local tax inspectors. Lord Browne held talks with President Vladimir Putin last week after alarm about the extent of claims for back taxes owed by the company, in which BP holds a 50% stake.

In a speech overnight, President Putin declared that Russia's tax inspectors should not 'terrorise' companies and signalled that clearer rules governing business taxation would be introduced. The remarks were, according to analysts, designed to reassure foreign investors about their operations in the country.

Shell hit by Gulf setback

SHELL, still reeling from the scandal of its overstated reserves last year, today found its attempts to look for new oilfields around the world has hit problems in the Gulf. Shell is a 34% investor in Petroleum Development Oman, which is pumping oil from the country's 2.4bn-barrel Mukhaizna field.

But the country's government has moved to bring in Occidental Petroleum as a co-investor, ordering Shell to hand over technical and geological data. The Omani government wants to raise production in the field after months of falling output. The field produces heavy oil that is thicker than crude, harder to refine and worth less on the international market.