BP’s army of small investors boosted as profits quadruple in a year and shares soar 39%

BP reported a record haul in the third quarter as higher energy prices caused by the Middle East conflict helped to nearly quadruple profits to reach an 18-year high. 

Britain’s legion of small investors in the energy giant have seen a boost from soaring oil and energy prices, with BP shares rocketing 39 per cent over the past year.

This represents a remarkable turnaround for investors who had seen BP’s shares fall to the 330p mark in April last year, off the back of its corporate struggles.

BP shares were trading at 621p today, up 88 per cent from their lows last year, with the rise fuelled by the surge in energy prices triggered by the Iran war and BP’s boardroom shake-up.

BP boss Meg O’Neill said the firm’s refineries have been ‘running close to capacity’ to help keep oil supplies flowing as the war has caused massive disruption to energy and fuel markets worldwide, with the vital Strait of Hormuz shipping route remaining closed.

O’Neill, who took the helm in April, is overseeing a strategic overhaul to prioritise slashing BP’s debt and strengthening the company’s balance sheet.

She has simplified the business into two divisions – oil and gas production and refining and sales – and put BP’s North Sea assets and its US biogas business up for sale.

BP said today that underlying replacement cost profit – its preferred measure of earnings – jumped to £6.36billion in the three months to September 30, almost four times the £1.63billion reported a year ago.

It beat analyst expectations of £5.44billion, and marks its highest quarterly profit since 2008 when it made £6.63billion. 

It comes after rival Shell reported quarterly profits of £8billion on Thursday with higher refining margins continuing to deliver a windfall for both firms.

BP will redirect the extra cash to address remaining liabilities from the Deepwater Horizon oil spill in 2010.

While record performance at BP’s oil and gas operations have helped to reduce its net debt to £10.35billion, it took a £2.9billion net impairment charge from its green energy business.

An impairment is when the value of an asset drops substantially below the amount on the company’s balance sheet.

It is the second time this year the oil major has been hit by large write-downs in its low-carbon business, previously flagging £3.02billion and £3.77billion in impairments in January.

This followed the FTSE 100 group’s admission last year that its foray into clean energy had been ‘misplaced’.

It is now redirecting spending from lower-carbon businesses to its oil and gas segments, which have profited from the disruption to oil supplies caused by the Iran war.

Mark Crouch, market analyst at Etoro, said: ‘There is an uncomfortable irony in BP’s results, as traditional oil and gas operations are generating enormous cash flows while billions are being written off investments tied largely to the energy transition.’

He added: ‘With rivals enjoying record valuations, the cost of those decisions is becoming harder to ignore. 

‘Higher energy prices have undoubtedly helped BP’s recovery, but the renewed focus on financial discipline offers something more lasting. December’s strategy update should reveal just how decisively management intends to build on that progress.’

The Middle East conflict has delivered a boost to earnings for oil firms but O’Neill acknowledged prices would eventually drop.

‘We continue to be more levered than our peers. We need to be competitive in all environments,’ she said.