Lower production and higher charges due to the oil spill outweighed the benefits of a 38 percent jump in the price of oil and a tripling of refining margins -- factors expected to generate bumper earnings across the oil sector.
BP said on Wednesday its replacement cost net profit was $5.5 billion in the quarter, down 2 percent on the same period last year and compared with predicted rises of 22 percent at Royal Dutch Shell Plc
BP took an additional $400 million charge for costs related to the United States' worst-ever oil spill, bringing the total predicted bill to $41.3 billion, although fines and punitive damages could lead to a much higher figure.
However, the rise in the oil spill charge was the smallest BP announced since the leak was halted, and Jason Kenney, oil analyst at ING, said the stabilizing of BP's provisioning was a reassuring sign.
BP's shares traded up 0.5 percent against a 0.3 percent rise in the STOXX Europe 600 Oil and Gas index <.SXEP> at 0715 GMT.
Fears about the potential costs mean BP trades at a significant discount to the combined value of its assets, and many analysts have pointed to this as an opportunity.
Admittedly an investment in BP requires a risk appetite given the many moving themes for the group and the potentially material changes these may imply. However, we continue to see significant risk to the upside and believe the rebound story remains intact, Kenney said.
However, few market players are predicting an early recovery in BP shares to pre-spill levels.
The ongoing obligations due to the Macondo incident will hamper the near-term growth of the business and prevent dividend growth until the gross misconduct liability is resolved in 2012, Richard Rose at Oriel Securities said.
The London-based company was forced to sell oil fields to pay for the spill and this contributed to an 11 percent drop in production compared with the first three months of 2010.
Excluding one-offs such as asset sales and the costs of the spill, BP's underlying results were $5.37 billion, short of an average forecast of $5.70 billion from a Reuters poll of nine banks and brokerages.
BP, Europe's third-largest oil company by market value, said it was pursuing a range of options to try and solve its dispute with its Russian partners in TNK-BP
(Additional reporting by Jon Hopkins; Editing by Louise Heavens and David Holmes)