LONDON - BP PLC posted a 16 percent rise in first-quarter net profits on Wednesday as gains from the sale of major assets to pay for the Gulf of Mexico oil spill outweighed the ongoing cost of that disaster.

But replacement cost profit, the measure most closely watched by analysts to indicate an oil company's health, fell 2 percent as lower production levels and higher charges from the spill overrode the benefits of a rising crude oil price.

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Net earnings of $7.2 billion for the three months to March 31 compared with $6.2 billion for the same period a year earlier.

Revenue rose 18 percent to $88.3 billion from $74.4 billion after the company sold off more than $24 billion in assets to pay for the Gulf spill.

Those asset sales led to a fall in production, however, lowering replacement cost profit to $5.48 billion, from $5.59 billion. The measure is closely watched by analysts because it excludes changes in the value of crude inventories and measures the amount it would cost to replace assets at current prices. It also excludes one-offs such as asset sales.

The first quarter results include a $400 million pretax charge for the oil spill, adding to $40.9 billion set aside by the company last year.

Production levels, which directly affect profits, have dropped in recent months after the London-based company sold oil fields and refineries and US regulators banned further drilling in the Gulf of Mexico following the April 20, 2010, explosion on the Deepwater Horizon rig, which killed 11 men and caused the biggest offshore oil leak in US history.

BP said that production for the quarter was 3,578 million barrels of oil equivalent per day, an 11 percent drop on the first quarter of 2010. However, it said that fall shrank to 7 percent after adjusting for the effect of acquisitions and divestments and entitlement impacts in its production-sharing agreements.

Most of the decrease in production was weighted toward the company's highest margin areas, and primarily reflected the impact to Gulf production because of the drilling moratorium, higher turnaround and maintenance activity in the North Sea and in Angola and an interruption to the Trans-Alaska Pipeline System.

Ranged against that production decline was a fire sale of assets, including a $7 billion deal with Apache Corp. that offloaded properties in the U.S., Canada and Egypt, that has so far brought in some $24 billion to help pay for the Gulf spill.