Iran war oil price surge doubles BP's quarterly profit to more than $5bn

BP reported a second-quarter profit of $5.73 billion, more than double the $2.35 billion earned during the same period last year, driven by soaring oil prices and heightened market volatility linked to the ongoing Iran war. The results were announced on Tuesday, with Chief Executive Officer Meg O'Neill highlighting the company’s strategic shift toward oil and gas operations and away from renewable energy projects. The surge in profitability reflects a sharp rise in Brent crude prices, which averaged around $97 per barrel in the second quarter, up from $78 in the first quarter and $67 a year earlier. European gas prices also climbed, reaching approximately €46 per megawatt-hour, up from €40 in the first quarter and €36 a year prior. The increased earnings come amid a series of divestitures and restructuring efforts by BP. The company has been actively selling non-core assets, including its US biogas business Archaea, which it acquired in 2022 for $4.1 billion. BP announced the launch of processes to sell Archaea, marking the latest move in its strategy to scale back investments in renewables and refocus on traditional hydrocarbon operations. Over the past several months, BP has written down more than $4 billion in value, primarily tied to Archaea, its solar unit Lightsource BP, and other low-carbon initiatives. Additional disposals include the completion of the sale of its Gelsenkirchen refinery, agreements to sell its retail business in Austria, and plans to divest its UK North Sea operations. In addition to these asset sales, BP has adjusted its capital spending plan for 2026, increasing projected expenditures from $13.5 billion to $14 billion. This adjustment follows a decision to delay some asset reductions, allowing the company to secure better returns. The revised capex forecast underscores BP’s intent to maintain financial flexibility while navigating the challenges posed by the Iran war and shifting global energy dynamics. O'Neill, who assumed leadership in April, outlined five key priorities for the company: strengthening the balance sheet, streamlining the portfolio, enforcing tighter investment controls, enhancing operational efficiency, and establishing structures that support quicker decision-making and stronger accountability. She acknowledged shortcomings in recent performance, stating that the company has not fully realized its potential and has underperformed against both internal benchmarks and shareholder expectations. “Our costs and liabilities are not resilient enough in a low-price environment,” she noted, emphasizing the need for improved resilience and consistency. Analysts from RBC commented on the importance of how BP executes its new strategies, noting that the success of its priorities will depend heavily on implementation. They praised the acknowledgment of past missteps but urged for clearer financial frameworks and more detailed plans moving forward. Meanwhile, BP’s stock saw a modest rise of 0.4 percent in early trading, slightly outperforming the broader European energy sector index, which gained 0.9 percent. Pre-tax profit at BP’s customer and products unit, which encompasses its substantial oil trading operations, reached $4.95 billion, surpassing the average analyst estimate of $4.46 billion and significantly outpacing the $1.53 billion recorded a year earlier. However, production levels dipped to 2.2 million barrels of oil equivalent per day, with refinery activity declining due to scheduled maintenance and disruptions stemming from the Middle East conflict. Upstream plant reliability also dropped to 92.4 percent in the second quarter, compared to 95.7 percent in the previous quarter. Despite these operational challenges, the overall financial performance highlights the impact of rising energy prices and the ongoing geopolitical tensions shaping the global markets.