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By Stephanie Kelly and Shadia Nasralla
- Business including oil trading posts best result since 2022
- BP’s gas and oil production units underperformed expectations
- Fuel margins, production outlook remain sensitive to Iran war
- BP plans to cut hybrid bonds by $4.3 billion, net debt rises
LONDON, April 28 (Reuters) – BP’s (BP.L) first-quarter profit more than doubled year-on-year to $3.2 billion – its highest since 2023 – the British oil major reported on Tuesday, beating expectations by 20% after the Iran war boosted its oil trading results.
The spike in oil prices triggered by the war has helped European majors reap billions of dollars from the energy supply crunch.
BP had already flagged an exceptionally strong quarter for its oil trading desk. Its customers and products business, which includes oil trading operations, recorded profit before interest and tax of $3.2 billion, its highest level since the 2022 Russian invasion of Ukraine, beating an average analyst estimate of $2.5 billion.
Results at BP’s gas and low carbon and oil production and operations units, meanwhile, came in slightly below expectations.
The company reported underlying replacement cost profit, its version of net income, of $3.2 billion, exceeding expectations of $2.67 billion in a company-provided poll of analysts and rising sharply from $1.38 billion in the same quarter a year earlier.
BP is rerouting its spending from low carbon projects to oil and gas to improve profitability.
BP said fuel margins are expected to “remain sensitive” to supply costs and conditions in the Middle East, while it expects reported upstream production in 2026 to be lower due to the effects of the conflict.
BP said it had exported around 100,000 barrels per day through the now virtually shut Strait of Hormuz from Iraq and Abu Dhabi as well as around 5-10% of its liquefied natural gas portfolio. It was able to keep its overall oil and gas production steady at 2.3 million barrels of oil equivalent per day by ratcheting up output in the United States.
“We’re controlling what we can control, which is trying to increase production in other parts of the world,” CEO Meg O’Neill said in an interview with Reuters.
Tuesday’s results were BP’s first with O’Neill at the helm. She became the company’s fifth chief executive since 2020 in April, tasked with leading its strategic pivot back to oil and gas following an ill-fated foray into renewables.
Shares in BP were up 3.1% by 1039 GMT, while a broader index of European energy companies rose 1.6%.
Profit at BP’s customers and products unit, which houses its huge oil trading desk, were the highest in the first quarter since Russia’s invasion of Ukraine upended commodity markets.
‘STRAIGHTFORWARD’ PRIORITIES
BP said it planned to reduce its hybrid bonds by around $4.3 billion to around $9 billion. Hybrid bonds blend debt and equity traits. They pay fixed income like bonds but allow issuers to skip payments, making them riskier and more expensive, while often not being counted as debt, helping to protect credit ratings.
Net debt is expected to edge higher due to working capital movements – a liquidity measure of current assets minus liabilities – amounting to $6 billion during the quarter, boosted by the impacts of the Iran war.
Net debt at the end of the first quarter was $25.3 billion from just over $22 billion in the previous quarter.
“It seems the priorities are clearly laid out and look pretty straightforward – pay down the debt, get the house in order and put the company on firmer footing,” RBC analysts said. “We anticipate a material reduction in net debt into year-end.”
Strikes by the United States and Israel on Iran from late February and Tehran’s closure of the vital Strait of Hormuz shipping route and retaliatory attacks on Gulf neighbours have driven up global oil prices.
Global benchmark Brent crude futures averaged around $78.38 per barrel in the quarter, up from about $74.98 a year earlier, according to LSEG data and Reuters calculations.
The full impact of the higher oil prices is likely to be felt in the second quarter. Typically, higher crude prices lead to lower refining margins.
Italian energy group Eni (ENI.MI) raised its 2025 share buyback target last week, citing sustained impact from the Iran war.
BP suspended its own share buyback programme in February to prioritise debt reduction and refocus investment on oil and gas projects offering better returns.
Reporting by Stephanie Kelly and Shadia Nasralla; Editing by Kirsten Donovan, Joe Bavier and Emelia Sithole-Matarise
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