Oil giant BP plc (NYSE:BP) (LON:BP) posted first-quarter profit of $4.2 billion today, beating analysts’ forecasts. BP plc (NYSE:BP) (LON:BP) executive Bob Dudley said these results represent a strong beginning to 2013 across all of their businesses.

bp PLC

BP Plc (BP.L) shares are up 3.7 percent this morning in London as the market started absorbing what at face value were a strong set of Q1 numbers.

The better-than-expected result is attributed to a greater share of new production coming on stream from major projects in Angola and the North Sea. This has helped BP to compensate for the production it has lost due to asset sales.

BP has sold about $65 billion in assets to offset spill costs and reshape the company. BP plc (NYSE:BP) (LON:BP) has been selling assets in order to raise funds to cover the costs arising from the Deepwater Horizon disaster. BP indicated that the cumulative cost of the Gulf of Mexico spill, one of the worst environmental disasters in U.S. history, remained at $4.2 billion.

The British oil company has been flagging for some time that its new production might deliver better profitability. BP plc (NYSE:BP) (LON:BP) said its exploration projects remained on track, and it planned to drill 15 to 25 exploration wells by the end of the year.

The major disappointment in the quarter was an 18 percent year-on-year fall in production in the United States. This probably reflects the company’s continued struggles to bring back its core deepwater production in the Gulf of Mexico after the blowout disaster of 2010.

BP plc (NYSE:BP) (LON:BP) is carrying out a share buyback program that is aimed at returning $8 billion to shareholders over the next 12-18 months.

While BP’s earnings impressed, the cash result was less impressive. Its Q1 CFO was USD 4.3 billion adjusted for Macondo, though this included a material cap outflow of USD 5.4 billion, of which USD 4 billion is seasonal.

BP plc (NYSE:BP) (LON:BP)’s rivals Exxon Mobil Corporation (NYSE:XOM) and Chevron Corporation (NYSE:CVX) also reported better-than-expected first-quarter profits last week, although the scale of BP’s earnings surprise is bigger. Royal Dutch Shell plc (NYSE:RDS.A) (NYSE:RDS.B) reports its first quarter results on Thursday.

Nomura equity research predicts the strong results and a degree of technical support from the share buyback should support the shares in the near term.