Energy powerhouse BP (BP.) gained ground after the FTSE 100 company pumped out forecast-beating Q1 profits. During the quarter to March, BP benefited from ‘exceptional’ oil trading driven by the effects of the Middle East conflict.
On the negative side of the ledger, operating cash flow disappointed and drove up net debt.
BP also warned Q2 reported upstream production will be lower when compared to the first three months of 2026.
Profits more than double
In the first results presided over by new CEO Meg O’Neill, BP revealed profits more than doubled in the three months to March 2026. This was fuelled by the surge in oil and gas prices seen since the start of the Iran war.
BP revealed that Q1 underlying replacement cost profit surged over 130% year-on-year to a better-than-expected $3.2 billion. That compared with the $1.5 billion generated in the previous quarter and was comfortably ahead of the $2.67 billion analyst consensus.
The Q1 performance was supported by steady operational delivery in upstream. In addition, higher volumes in the US Gulf and continued strength at US shale arm bpx Energy offset disruption in the Middle East.
Upstream guide disappoints
Looking ahead, BP warned Q2 upstream production is expected to be lower due to seasonal maintenance and ongoing Middle East disruption. BP also expects trading results to normalise following Q1’s supernormal showing.
Net debt came in at $25.3 billion at the end of Q1. That was up from $22.18 billion at the end of last year and driven by lower operating cash flow. BP is aiming to bring net debt down to between $14 billion and $18 billion by the end of next year.
What did the CEO say?
‘I join at a time when our industry is operating in an environment of conflict and complexity, playing a vital role in keeping energy flowing,’ commented O’Neill.
‘Overall, our business continues to run well. This was another quarter of strong operational and financial delivery, and we made further progress towards our 2027 targets.’
Thanks to the surge in fossil fuel prices caused by the Iran war, energy supermajors including BP are raking it in. Shares in BP are up 35% year-to-date and have almost doubled on a five-year view to boot.
While this is positive news for shareholders, BP’s exceptional profits are not a great look at a time when households face rising fuel prices and energy bills. Prospective investors should therefore remember that windfall profits tend to attract windfall taxes, as there is little political risk in being ‘tough’ on big business.
Read the press release here: https://www.bp.com/en/global/corporate/investors.html
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