Shares in oil giant BP (BP) leaked today after weakness in its trading arm overshadowed a boost in production.
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Average Blow
The group in a Q3 trading update said that its upstream oil and gas production – which refers to exploration and production activities – is now expected to be higher between July and September, compared with the previous three months.
In the second quarter, it produced around 2.3 million barrels of oil equivalent per day.
That should have been a huge boost to BP, given that previously it had said that upstream production would come in lower quarter-on-quarter. Production is key to group revenues – see below:
However, BP flagged that its “oil trading result is expected to be weak” in the third quarter, while gas trading was set to be “average”.
Brent crude oil prices averaged $69.13 per barrel in the third quarter, compared with $67.88 per barrel in the second quarter. BP expects the prices it received in its gas and low carbon business to take a $100 million hit compared with the previous three months.
U.S. gas prices averaged $3.07 per million British thermal units in the third quarter, compared with $3.44 per mmBtu in the second quarter, BP said.
It added that net debt at the end of the third quarter is expected to be broadly flat compared with the end of the second quarter at around $26 billion.
Trading Thorn
“BP’s trading arm has become a thorn in its side. Having warned in April of weak gas trading, the same problem has now been reported with its oil trading arm,” said Russ Mould, investment director at AJ Bell. “The company might argue that fluctuations with the trading business are par the course, and that its key focus is production. Yet the trading arm is far from insignificant as it can provide a nice sweetener to group earnings. Volatile energy prices are generally good for trading. Questions will now be asked of BP as to why the trading arm isn’t riding high.”
BP has had a volatile 2025, but its share price has been making strides since the middle of the year – see below:
It has pivoted away from a focus on renewable energy back to its oil and gas heritage to try and spark an even bigger recovery. It recently gave a thumbs up to a $5 billion Tiber-Guadalupe project in the Gulf of America/Mexico, expected to begin producing 80,000 barrels of oil a day from 2030. It has an estimated 350 million barrels in recoverable resources, BP said.
In addition, it recently revealed a major cost-cutting drive with the shedding of over 6,000 jobs, or about 15% of its office-based workforce, by the end of the year.
It has also been touted as a takeover target with rival Shell (SHEL) reported to be one of the names in the frame.
Is BP a Good Stock to Buy Now?
On TipRanks BP has a Moderate Buy consensus based on 6 Buy and 3 Hold ratings. Its highest price target is $66. BP stock’s consensus price target is $41.90, implying a 24.33% upside.
