updated 4/26/2005 9:34:55 AM ET 2005-04-26T13:34:55

BP Group PLC, one of the world’s largest oil companies, said Tuesday that quarterly profits rose by 35 percent, boosted by higher oil prices and a small increase in production that outweighed lower retail marketing margins.

BP said that net profit was $6.66 billion for the three months to March 31, up from $4.95 billion in the first quarter of 2004. Revenue jumped to $79.8 billion, from $68.9 billion.

BP chief executive John Browne said that high oil prices had “generated substantial additional cash flow.” Brent crude traded on the International Petroleum Exchange averaged $47.62 over the three months — more than $3.77 a barrel higher than in the fourth quarter.

“This strong start in 2005 reflects the results of our significant investment program over the past few years and improvements in underlying performance,” Browne added.

BP said that its replacement cost profit for the quarter was $5.49 million, up from $4.26 million. The replacement cost figure, which takes into account both tax and fluctuations in the value of BP’s stocks of oil, is closely watched by analysts as it provides a stronger comparison with BP’s competitors.

Removing non-operating items such as gains from asset sales of $535 million, the result was $4.96 billion, up from $3.5 billion a year ago — and substantially ahead of analysts’ expectations of around $4.3 billion.

Shares in BP were 1 percent higher at 5.44 pounds ($10.37) in morning trade on the London Stock Exchange.

The spike in oil prices made BP’s upstream oil and gas exploration and production division the main profit driver for the period, with the unit posting a 53 percent gain to $6.49 billion.

Browne said that the first quarter trading environment was generally stronger than a year ago as oil prices were supported by high demand growth and limited spare production capacity.

However, Browne said that while world economic growth was sustained in the first quarter, BP expected “some moderation of global growth” through 2005.

BP said that production for the quarter increased marginally to 4.1 million barrels of oil equivalent per day, from 4.01 million a year ago, partly due to increased volumes from its Russian joint venture, TNK-BP.

TNK-BP was earlier this month hit with a $1 billion Russian government demand for back taxes. BP said the discussions with the Russian authorities are ongoing, and noted that the company has “extensive indemnities from our co-joint venturers in respect of historic tax liabilities.”

BP said that the financial impact from a fatal explosion at its Texas refinery on March 23 was minimal. The refinery produces 3 percent of BP’s supply of petroleum products in North America, processing about 430,000 barrels of crude oil a day.

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