BP Amoco posted record first-quarter profit of $2.71bn, up 256% from the same period last year, as a result of higher oil and gas prices.

The company said improved refining margins, better sales and tax benefits also contributed to the sharp rise in first-quarter profits.

The results were at the top end of analysts' expectations, which had ranged between $2.4bn and $2.8bn.

First-quarter profits rose 28% from the previous quarter, which itself was also a record figure.

Crude oil prices rose to an average of $27 a barrel in the first quarter of this year from $11.50 last year.

Cost cutting

"This record result reflects not only the better environment but also the sustained improvement in the cost base over the past year," said Sir John Browne, BP Amoco Chief executive.

Cost cutting contributed an extra $280m to the group's pre-tax profit in the first quarter, the company said.

It also announced a dividend of 3.22 pence per ordinary share.

BP also said newly-acquired Atlantic Richfield, or Arco, unit saw its first-quarter profit of jump 239% to $583m.

"With the completion of the Arco acquisition in April, we are well placed to deliver substantial benefits from further cost reductions and margin improvement from new business while maintaining the competitiveness of our existing portfolio," Sir John said.

The company is continuing to expand, with $5bn earmarked to buy Burmah Castrol this year.

It also plans to increase capital spending to around $10-$11bn this year, from $7bn last time.

BP Amoco has now overtaken rival Shell as the world's second bigget oil company.

Despite the strong results, BP shares fell 14 pence to 583p.