BP warned of falling profits but expects production growth. Which is more important?

British oil and gas giant BP warned that falling oil and gas prices had a negative impact on its second-quarter results. However, the company expects higher production volumes and a strong performance from its oil trading division.

BP said the decline oil prices would cut its quarterly profit by $600-800 million, gas - by $100-300 million. At the same time, the company expects growth in the upstream segment and strong results in oil trading. According to BP's preliminary estimates, production in the second quarter will exceed the previous quarter's figure. This is an updated forecast: previously the company believed that production would remain flat. For gas trading, BP forecast a mediocre result, while oil trading is strong.

BP's shares jumped 3.1% in London - better than the sector - after the forecast was released. Compared with Shell and ExxonMobil, which had subdued updates this week, BP sounded more optimistic, notes Bloomberg.

BP is scheduled to report its second-quarter results on August 5.

BP's updated quarterly guidance could push consensus earnings estimates up more than 10% - higher-than-expected production and strong trading, wrote The Wall Street Journal, citing Jefferies.

Wall Street investment giants JPMorgan and Citi were also positive on the new forecast from BP, reported CNBC. JPMorgan said it looked stronger than "unimpressive" updates from rivals. Citi analyst Alastair Syme called the news from BP "encouraging" and said his estimates for the British company's shares are "about 15-20% above the current consensus forecast."

BP's consensus rating calculated by FactSet is at Neutral (Hold). The majority of analysts covering the company's securities - 19 out of 32 - recommend investors to maintain their current position in BP stock, neither buying nor selling. The average target price for BP's American Depositary Receipts (ADRs) of $35.02 per paper predicts them to rise 11% within a year from their closing price on July 10.

BP is in dire need of an operational boost - especially as it looks for a new chairman and returns from green technology to its traditional oil and gas business, Writes Bloomberg. All this is happening against the backdrop of volatile oil prices: the quotations are under pressure from U.S. duties, OPEC's change of course and military actions in the Middle East. Brent for the quarter fell in price by 9% and by July 11 was trading just below $70 per barrel - the level, which BP is focused on in its strategy, the agency notes.

BP has underperformed analysts' expectations for two consecutive quarters. Activist investment fund Elliott, which favors radical change, is increasing pressure on the company's management. CEO Murray Okincloss has pledged to increase oil and gas production and cut investments in green energy. He also unveiled a plan to sell about $20 billion worth of assets by the end of 2027.

But the strategy has so far failed to inspire investors: the company's capitalization has fallen by a quarter since April 2024, and the market is increasingly discussing rumors of a possible takeover. Last month, speculation was refuted by Shell, which said it had no intention of buying its London rival.

This article was AI-translated and verified by a human editor