Oil giant BP proves resilient in ‘volatile’ period

• BP’s resilient first quarter numbers reaffirms group’s strategy, with solid upstream and downstream performance.
• Oil and gas production increased by 2%, helped by new projects in Egypt, Trinidad and the Gulf of Mexico.
• We continue to recommend the stock as a ‘buy’ but investors should be cautious of the risk associated with the oil sector.

This morning we have had a solid first quarter trading update from BP; both its upstream and downstream operations remain positive, despite increased operating costs at the former. Overall production was in line with expectations and with many investors in the stock for the attractive income; the rise in the quarterly dividend will be welcomed.

The CEO highlighted a volatile period for the oil price but the resilient first quarter numbers underlined the strength of their strategy.

Oil and gas production increased by 2% bolstered by new projects in Egypt, Trinidad and the Gulf of Mexico as well as the US shale assets acquired from BHP. Underlying replacement cost profit was lower at $2.4 billion, but this was slightly above analyst consensus forecasts.

It’s been a bumpy ride but the shares have been making steady progress since early 2016 with a rise of around 55% and 10% year to date.

Our View on BP - Buy

We continue to recommend the shares for investors seeking a balanced return, but the volatile nature of oil prices and the political risks associated with certain assets makes this a medium risk idea.

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