(April 14): BP plc said its oil trading performance was exceptional in the first quarter as the Iran war caused a surge in prices.
The conflict sent oil, gas and fuel prices soaring as shipping through the crucial Strait of Hormuz came to a near-halt and Iran targeted key energy infrastructure around the Persian Gulf in retaliation for US-Israeli attacks. Brent crude is up more than 60% this year.
In an update on Tuesday, BP signalled its traders, who deal energy from its operations and third parties around the world, were able to profit from the volatility and price surges caused by the war. The UK energy giant, which will report earnings later this month, said its natural gas trading results were “average”.
Shell plc last week also flagged a strong result from its oil traders. US rivals Exxon Corp and Chevron Corp, meanwhile, disclosed about US$7 billion ($8.9 billion) of mark-to-market derivative losses combined, as they were forced to post paper losses on hedges associated with cargoes that will take several weeks to be delivered.
BP shares edged lower along with European peers in early London trading, as oil prices fell on signs the US and Iran may revive peace talks after the start of an American blockade of ships transiting to and from Iranian ports.
See also: Iran war wipes out global oil demand growth this year, IEA says
BP’s asset exposure in the Middle East — primarily through joint ventures in Iraq and the United Arab Emirates — is low compared to peers. The company said its oil production was down slightly compared to the fourth-quarter.
The UAE and other Gulf producers have been forced to halt some production of oil, gas and refined products. BP’s net share of production from Abu Dhabi is approximately 200,000 barrels of oil per day from ADNOC Onshore, according to BP.
In Iraq, BP is a core partner in the giant Rumaila field in the south near the Persian Gulf. Rumaila produced more than 1.4 million barrels per day in 2024. BP acts as a contractor there rather than holding ownership interest.
See also: Oil declines as US, Iran weigh more talks with blockade in place
Barclays plc analyst Lydia Rainforth lowered her first-quarter operating profit estimate due to BP’s oil production decline, adding that a lag in passing through higher prices means benefits will be felt in the second quarter. She also highlighted stronger downstream performance.
BP’s refining margins improved by US$1.70 per barrel from the previous quarter. That implies a roughly US$935 million uplift for BP this year, based on the company’s rule of thumb that every US$1 increase in refining margins will add US$550 million to pre-tax operating profit in 2026.
Net debt is expected to rise to a range of US$25 billion to US$27 billion, excluding hybrid bonds and lease obligations, BP said. This is an increase from US$22.2 billion at the end of 2025.
The company said the rise is driven primarily by a significant working capital build in the range of US$4 billion to US$7 billion, largely due to the higher price environment.
The report is BP’s first guidance since chief executive officer Meg O’Neill took over on April 1, with a mission to make the company leaner, focus on oil and gas production growth and divest low-return clean energy assets. She replaced Murray Auchincloss, ousted last year by new chairman Albert Manifold, who said changes weren’t happening fast enough.
The rise in net debt complicates BP’s turnaround targets. The London-based company aims to rein in net debt to a range of US$14 billion to US$18 billion by the end of 2027.
In February, BP halted its share buy-backs and withdrew its guidance of returning 30% to 40% of operating cash flow to shareholders in an effort to shore up the balance sheet.
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