BP profit quadruples as Iran war sends refining margins soaring and debt tumbles

BP's profit for the July to September period quadrupled to $4.7 billion ($4.2bn), as the Iran war disrupted refining and trading earnings. The British oil and gas giant also exceeded analyst forecasts and reduced its net debt by $8.4 billion ($7.5bn). The company's underlying replacement cost profit nearly quadrupled to $8.5 billion ($7.6bn), outpacing expectations.

This significant profit surge is attributed to higher refining margins, which are the difference between crude oil prices paid by refiners and the earnings from fuels like diesel. As the war curtailed Middle Eastern fuel exports, global refining operations benefited from limited supply. BP's CEO, Meg O'Neill, highlighted the strong results, driven by the favorable economic environment.

Net debt fell to $13.9 billion ($12.4bn) from $22.3 billion ($19.9bn) three months earlier, thanks to the suspension of share buybacks to bolster BP's financial position. The company has now met its targets for debt reduction and cost-cutting, maintaining its quarterly dividend of 8.66 cents per share. BP plans to prioritize using its cash reserves to settle remaining liabilities from the 2010 Deepwater Horizon explosion and oil spill, following a recent agreement to expedite $16 billion ($14.3bn) in payments to the U.S. state of Louisiana.

O'Neill is set to unveil her strategy in December as BP, traditionally lagging behind its peers, has redirected its focus towards more profitable oil and gas ventures, having reduced clean energy spending. Competitors Shell and TotalEnergies also reported impressive profits earlier in the week. BP's shares increased by 0.3% in early trading, while Brent crude, the global oil benchmark, traded around $113.6 a barrel, a 2.5% rise over the week, up from below $72 per barrel before the Iran war began in late February.

West Texas Intermediate stood at approximately $104.2 a barrel, a 1.5% increase over the week. BP has adjusted its oil price assumptions, now anticipating Brent to average $87 a barrel this year, up from $70, both figures adjusted for inflation to 2024 prices. The company expects Middle Eastern supply disruptions to persist into 2027 and expects refining margins to remain elevated through the final quarter of this year.