BP reported a 20% drop in first-quarter profits today after it was hit by a sharp slump in oil and gas prices.
The energy giant said underlying replacement cost profit fell to US$2.6bn (£1.7bn) from US$3.2bn (£2.1bn) in the same period in 2014, but this was not as bad as City expectations.
BP said Brent crude averaged US$54 per barrel during the quarter, half of the level of a year ago, while gas was 40% lower.
Chief executive Bob Dudley said: “We are resetting and rebalancing BP to meet the challenges of a possible period of sustained lower prices. Our results today reflect both this weaker environment and the actions we are taking in response.
“We are continuing to progress our planned divestment programme, we are resetting our capital spending, and we are addressing costs through focusing on simplification and efficiency throughout BP.”
The 20% fall in profits was on an underlying basis but, when one-off items are included, replacement cost profit was 39% lower.
However this was a sharp improvement on the fourth quarter when, on this measure, BP fell to a US$969m (£645m) loss.
The group confirmed an announcement at the time of its annual results in February that it expected investment to total US$20bn (£13bn) this year, a fifth lower than previous expectations.
“We will also look to take advantage of any opportunities presented by the lower price environment to further reduce capital expenditure or costs,” Mr Dudley added.
BP suffered a 57% slump in underlying profits for its upstream arm — which includes exploration, production storage and processing — driven by lower oil and gas prices.
Underlying profits from downstream — which includes refineries, product manufacturing and petrol stations — more than doubled, helped by a “stronger overall refining environment” as well as efficiency programmes reducing costs.
Meanwhile, BP was still counting the cost of the blow-out of the Deepwater Horizon rig in 2010 which killed 11 workers and spilled millions of barrels of oil into the Gulf of Mexico, damaging fishing and tourism as well as marine and wildlife habitats.
It added another US$332m (£218m) charge for the first quarter, taking its total charge to date for the spill to US$43.8bn (£28.8bn).
The results come amid speculation about whether BP will become a takeover target after rival Royal Dutch Shell agreed to snap up exploration firm BG in a £47bn deal.
Michael Hewson, chief market analyst at CMC Markets UK, said: “This morning’s trading update from BP managed to surprise the market and beat expectations.
“The next question now is whether this number makes BP a more attractive target for an acquisition.”