BP sees oil and gas production move higher, but lower prices will impact profits

09 April 2024 , 07:35

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BP will report its first quarter results on May 7 (Image: PA Wire/PA Images)

BP has informed investors that oil and gas production likely saw an increase in the first quarter of this year, despite a drop in commodity prices.

The oil giant anticipates that production will have been "higher" than the last three months of 2023 when it reports its results on May 7. Additionally, the company expects gas and low carbon energy production to be "slightly higher".

However, due to falling oil and gas prices, BP is bracing for a financial impact. The price of a barrel of Brent oil averaged 83.16 dollars in Q1 2024, which is 1.18 lower than the final quarter of 2023. The cost of Henry Hub gas also fell from 2.88 dollars to 2.25 dollars per million British thermal units.

As a result, BP has warned shareholders to expect a hit of 200-400 million dollars (£158-316 million) to its underlying replacement cost profit before interest and tax due to the fall in gas price and other issues. A weak Egyptian Pound is expected to cost the business an additional 200 million dollars.

Furthermore, the company's oil production unit is set to take a hit of 300-600 million dollars (£237-474 million), partly due to production in the Gulf of Mexico and the United Arab Emirates being affected by price lags. BP's gas trading arm is anticipated to maintain its robust performance, while the previously "weak" oil trading division is set to show a "strong" turnaround, according to BP.

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This update follows Shell's announcement on Friday that its gas trading had dropped from an "exceptional" close to the year, although it will still be "strong," Shell noted. In line with BP, Shell is also predicting a rise in its production of oil and oil equivalents when compared to Q4.

Lawrence Matheson