BP shares lift as oil giant cheers surge in profit

BP's profit has skyrocketed due to the disruption in fuel supplies caused by the Iran war. The FTSE 100 company reported earnings of $8.5bn for the third quarter, nearly quadrupling compared to the same period last year. Analysts had estimated a much lower figure. BP has managed to halve its debt over the past year, now sitting at $13.9bn.

The company expects to further reduce its debt by $6bn from the sale of its lubricants business, Castrol. This financial boost has sent BP's shares up by 1.4% to 633p in the early trading hours of Friday. The stock has also risen by 44% since the beginning of the year. These impressive numbers mirror those of London-listed rival Shell, which recently reported a more than doubling of its third-quarter profit to $12.1bn.

BP's chief executive, Meg O'Neill, praised the industry's adaptability, noting that refineries have been operating near capacity to compensate for supply shortages, while shipping has been utilizing different and longer routes. Strategic and commercial reserves releases are also helping to alleviate supply gaps. BP acknowledged a $5bn writedown on its low-margin renewables arm, as the company shifts its focus back to its more profitable oil and gas sector.

This strategic pivot has been described by analyst Ashley Kelty from Panmure Liberum as a "highly value destructive" move. BP has also reduced its planned transition capital expenditure by over $5bn annually, to a target of up to $2bn. O'Neill, who took over as CEO in April, will provide her first major strategy update in New York in December.

While the company's operational performance and cash generation remain strong, the debate continues over whether management can regain investor confidence in the company's long-term direction. Value concerns persist among investors due to board disharmony, with some executives reportedly keen on breaking up the business, while others oppose the idea.

Ultimately, BP needs to show that it has a compelling vision for delivering higher shareholder returns to close the value gap between the company and its peers.