Shares in BP (LON:BP.) continued their winning streak after the energy giant issued updated Q2 production and margin guidance. Higher average Brent crude prices during the quarter mean higher margins, despite a drop in oil and gas output.
Higher prices, higher margins
Upstream production is forecast around 2.2 billion boepd (barrels of oil equivalent per day) against 2.34 billion in Q1. That breaks down to around 1.45 billion boepd of oil and 750 million boepd of gas and low carbon energy.
The firm said the dip in output was due to seasonal maintenance in the Gulf of America and disruption in the Middle East. Oil trading is expected to generate slightly higher profits than Q1, while gas marketing and trading is seen broadly flat.
In the customer segment, seasonally higher volumes and higher fuel margins should provide a boost to earnings. In products, refining margins were stronger than in Q1 and should generate additional income of $1.2 billion to $1.4 billion.
As a rule of thumb, a $1 move up or down in the Brent crude price means a gain or loss of $340 million in BP’s operating profit. The average Brent crude price in Q2 was $103.85/barrel against $81.13 in Q1. Meanwhile, BP’s average Q2 refining margin was $29.60/barrel against $16.90 in Q1.
We aren’t experts in energy stocks, but it doesn’t take an expert to appreciate higher oil and gas prices mean higher cash flow and profits. Even with lower output due to maintenance and Middle East disruption, investors can expect a decent Q2 report next month.
European energy stocks all trade on single-digit P/E (price to earnings) multiples while their US counterparts trade on mid single digit multiples. Again, we aren’t experts, but even those we’ve asked the question don’t have a definitive answer.
With Brent crude trading back at $85, analysts are going to have to revisit their forecasts for BP, Shell (LON:SHEL) and other energy producers. Most have used an average Brent price of $75 in their 2026 models, which already looks way out of date.
Read the press release here: https://www.bp.com/investors
