British energy major BP said on Tuesday it expects stronger oil and gas prices, higher refining margins and solid trading performance to significantly boost its second-quarter earnings following the surge in global energy prices during the Iran conflict.
The company said higher commodity prices are expected to add between $1.8 billion and $2.1 billion to earnings from its oil production and operations business, while its gas and low-carbon energy segment could contribute an additional $500 million to $700 million. Stronger refining margins are also projected to lift earnings in its products business by $1.2 billion to $1.4 billion, with oil trading expected to outperform the previous quarter.
The improved outlook comes despite BP forecasting lower upstream production of 2.17 million to 2.22 million barrels of oil equivalent per day in the second quarter, down from 2.34 million boed in the first quarter, partly due to disruptions linked to the Middle East crisis.
BP said Brent crude averaged about $97 per barrel during the April-to-June quarter, compared with roughly $78 in the previous quarter, as the Iran war disrupted global energy supplies and tightened markets.
The company also reported a sharp reduction in net debt to between $22 billion and $23 billion at the end of June from $25.3 billion three months earlier, supported by debt repayments and liability reductions. BP expects to record around $1 billion in impairments, mainly related to its transition businesses, and about $500 million in exploration write-offs linked largely to the sale of its stake in Canada’s Bay du Nord offshore project.