BP PLC reported a substantial increase in profits for the first quarter of 2026, driven by a surge in earnings from its oil trading operations. This performance was fueled by energy price spikes and market volatility resulting from conflict in the Middle East. Financial results showed total revenue for the quarter reached $53.371 billion, an 11% increase year-over-year. Profit attributable to shareholders soared to $3.842 billion, a 459% rise compared to the same period last year. The adjusted net profit, referred to as underlying replacement cost profit, was $3.198 billion, marking a 132% increase and significantly surpassing the average analyst forecast of $2.64 billion. Adjusted earnings per ADS were $1.24, substantially higher than the $0.53 reported a year earlier.
Concurrently, a key liability metric closely watched by the market showed an increase. Net debt grew by 14% compared to the previous quarter, reaching $25.309 billion.
The company's oil trading business provided a powerful boost to profitability. BP had previously indicated this month that its oil trading performance had been "exceptionally strong." The financial report revealed that the adjusted net profit for the company's retail and refining segment was $3.203 billion for the quarter, surging 373% year-over-year and 138% compared to the prior quarter. The trading unit, which handles transactions for the company's own and third-party global energy businesses, capitalized on the price volatility and increases caused by the Middle Eastern conflict. Since the end of February, following attacks involving the US and Israel against Iran, Brent crude futures prices rose by 43% during March.
Shell PLC had also previously reported that its oil trading performance was "significantly stronger" than the previous quarter, citing "chaos" in the global oil supply system as creating excellent arbitrage opportunities. Furthermore, BP's relatively smaller asset footprint in the Middle East, where it primarily operates in a contractor role, unexpectedly served as a risk buffer during the crisis, allowing it to avoid the significant production cuts experienced by some competitors. The company operates mainly through joint ventures in Iraq and the UAE. In the Abu Dhabi onshore oil fields, its net production share is approximately 200,000 barrels of oil per day. At the giant Rumaila field in southern Iraq, one of the world's third-largest oil fields producing over 1.4 million barrels per day in 2024, BP is clearly defined as a "contractor," not an owner or operator.
This "light asset" positioning means BP benefits less from oil price increases during normal times, but its exposure to production risks is significantly lower than competitors with large ownership assets in the Middle East when conflicts force Gulf producers to suspend some output. BP also stated that strong production performance from its assets in the Gulf of Mexico and US shale gas operations offset the impact on its Middle Eastern business.
Despite the strong performance in trading, pressure is simultaneously building on BP's balance sheet. The increase in net debt during the quarter was primarily due to a significant rise in working capital, a change attributed "mainly to the higher price environment." While high oil prices boost trading profits, they also increase the capital required for procurement and inventory management. This signal indicates that the "oil price dividend" has not fully translated into free cash flow, as part of the profit is being absorbed by the expansion of working capital driven by rising prices.
This earnings report is the first released under CEO Meg O'Neill, who took office on April 1st. Her mandate is to streamline the company's structure, focus on growth in oil and gas production, and divest low-return clean energy assets. The robust trading performance and significant profit growth provide a valuable window of funding and time for O'Neill's reforms. BP has now very clearly shifted its strategic focus back to its core oil and gas business. Under pressure from the new management and activist investors like Elliott Investment Management, BP has publicly committed to increasing investment in oil and gas, concentrating on boosting production, streamlining operations, and improving returns.
Since 2020, when BP made a major bet on a low-carbon transition leading to a surge in debt, its stock price had consistently underperformed among major oil and gas peers. However, since late February, buoyed by "exceptionally rich" trading profits and relatively limited production disruptions, BP's share price has risen nearly 20%, unexpectedly outperforming other companies in the sector. Some analysts noted that BP's previously low stock price base gave it greater relative leverage from oil prices around $100 per barrel.
Nevertheless, Joshua Stone, Head of European Energy Equity Research at UBS Group, previously stated that while a "higher for longer" oil price environment is "undoubtedly positive" for BP, the company "still has work to do to regain investor confidence" to sustain long-term outperformance. The pace of BP's debt reduction following the pause in share buybacks, along with its ability to consistently deliver growth in its traditional oil and gas business, will be key indicators for judging the sustainability of its stock price rebound.
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