BP reports highest profits since 2023 off the back of Iran war
Oil and gas giant BP has reported its highest quarterly profit since 2023 in its latest trading update, as the group capitalised on rising oil prices sparked by the ongoing conflict in the Middle East.
In its first results since the war in Iran broke out in February, BP reported a surge in profits to $3.2bn (£2.3bn) in the first financial quarter, up from $1.3bn the prior year.
This also surpassed analyst expectations of $2.7bn.
The group credited the surge to rocketing oil prices, stating it reflected “exceptional oil trading” in addition to “seasonal inventory builds”.
The board announced a dividend of 8.3 cents per ordinary share and plans to reduce its hybrid bond financing by roughly $4.3bn.
Brent crude surge
Brent crude, the global benchmark for oil, has soared since early March as attacks across the gulf led to the effective closure of the Strait of Hormuz, which transports a fifth of the world’s oil, while plants and ports across the region have been damaged.
Brent is currently hovering around $110.2 after a 1.8 per cent rise in early morning trading.
The results are the first under chief executive Meg O’Neill, who took over from Murray Auchincloss at the beginning of April, who left after less than two years in the role.
O’Neill admitted joining at a time when “our industry is operating in an environment of conflict and complexity.
But she acknowledged that BP had been working with customers and governments to “minimise disruption and the impact it can have on people’s lives”.
Elsewhere, net debt jumped to $25.3bn from $22.2bn at the end of last year, primarily driven by lower operating cash flow.
Cash flow dipped to $2.9bn, reflecting the costs of longer shipping routes, caused by closure of the strait, and rising prices.
Duncan Ferris, investment writer at Freetrade, said: “In February, BP announced it was halting share buybacks as weak oil prices hurt profitability. How times change.
“The firm has been among the best-performing supermajors since the escalation of conflict in Iran. Higher oil prices, and the opportunities they offer to the company’s traders, have breathed life into a stock battered by faltering low-carbon projects and investor unrest.
“However, disruption in the Middle East is weighing on the company’s production outlook, and the business acknowledged that margins and volumes remain sensitive.”
Production and taxes
The group’s upstream plant reliability, which is responsible for finding and extracting raw oil and gas, improved slightly to 95.7 per cent to 95.4 per cent.
This was after “higher production in the Gulf of America” was offset by the “impact of disruption in the Middle East and North Sea divestment” at the end of last year.
Its customer and products business, including its refineries and distribution networks, also saw its reliability inch up to 96.3 per cent from 96 per cent.
Fossil fuel producers are also still subject to a windfall tax, dubbed the energy profits levy, imposed in the wake of Russia’s invasion of Ukraine, which led to some companies having record profits.