LONDON (AP) -- Energy company BP reported Tuesday that its first-quarter profit fell 26 percent in the wake of the sharp drop in oil prices, less than many analysts had feared.
The London-based company said net income for the quarter was $2.6 billion, compared with $3.5 billion in the same period last year. Market expectations were for a drop of as much as 60 percent, however, and BP share rose 1.5 percent on the news in a lower market.
Underlying replacement cost profit - a measure that strips out fluctuations in the value of reserves - was $2.6 billion compared with $3.2 billion for the same period in 2014.
Chief Executive Robert Dudley said the results "reflect both this weaker environment and the actions we are taking in response."
"We are continuing to progress our planned divestment program, we are resetting our level of capital spending, and we are addressing costs through focusing on simplification and efficiency throughout BP," Dudley said.
The price of Brent crude, the benchmark for North Sea oil, averaged $54 a barrel in the first quarter, half the level of a year earlier. All of the major oil companies will be taking a hit, said Fadel Gheit, a managing director and senior analyst at Oppenheimer & Co. Inc.
"The only good thing about the first quarter of this year is that it is over," Gheit said.
BP is also trying to repair the damage for past mistakes. The Deepwater Horizon spill, which killed 11 workers and spilled billions of barrels of oil into the Gulf of Mexico, continued to take a toll on BP's balance sheet.
It took a $332 million charge for the first quarter, taking its total pre-tax charge to date for the spill to $43.8 billion.
Speculation has swirled in the markets about whether BP may become a takeover target. Low oil prices tend to boost mergers and acquisitions in the industry - Shell recently agreed to buy BG for 47 million pounds ($69.7 billion).
"This morning's trading update from BP managed to surprise the market and beat expectations," said Michael Hewson, chief market analyst at CMC Markets UK. "The next question now is whether this number makes BP a more attractive target for an acquisition."