BP Is Selling Another Green Energy Business. Strong Oil Prices Help Drive Best Profit Since 2022

BP is putting its U.S. biogas business on the market as the energy major continues to overhaul its portfolio under new CEO Meg O'Neill, while reporting its strongest quarterly profit since 2022 on the back of higher oil and gas prices.

The company said its underlying replacement cost profit, a closely watched measure of earnings, climbed to $5.7 billion in the second quarter, comfortably ahead of analyst expectations of around $5.1 billion. The earnings were supported by stronger crude, natural gas and refined fuel prices during the recent conflict involving Iran.

Alongside its earnings report, BP announced plans to sell Archaea Energy, the U.S.-based renewable natural gas producer it acquired in 2022 for roughly $4 billion. The business captures methane emissions from landfill sites and converts them into renewable natural gas, but has fallen short of the returns BP expected from the investment.

Speaking to CNBC, O'Neill said some of the company's investments had failed to generate the level of returns BP targets, adding that management is reviewing the portfolio to focus capital on higher-performing businesses.

The sale marks another step in the company's strategic reset since O'Neill took over in April. BP has already agreed to sell its U.K. North Sea business, exited its Austrian retail fuel network, divested its stake in Canada's Bay du Nord offshore project, and shut down its venture capital arm.

The company also recorded another impairment tied to its low-carbon operations during the quarter, following significant write-downs in its renewable energy portfolio last year.

In its earnings statement, O'Neill said BP is taking a fresh look at the business to improve performance, reduce complexity and strengthen areas that generate stronger financial returns, Financial Times reported.

Investors have been watching closely to see how quickly the new leadership team can improve BP's financial position after years of criticism that the company's energy transition strategy weighed on shareholder returns. Biraj Borkhataria, an analyst at RBC Capital Markets, said the latest results showed progress but noted that investors would be looking for clearer evidence that management can execute on its plans.

Reducing debt remains one of BP's biggest priorities. The company said its combined financial obligations, including net debt, hybrid bonds and remaining payments related to the Deepwater Horizon oil spill, fell by about $7 billion during the quarter. BP now expects net debt to drop below $18 billion by the end of this year, reaching that target roughly a year earlier than previously planned.

O'Neill also said the company has received unsolicited interest from multiple parties regarding its North Sea assets. She reiterated support for continued oil and gas production in the region, arguing that domestic production remains important as the U.K. continues to rely heavily on fossil fuels to meet its energy needs.

BP's strong quarter mirrored results across parts of the global energy industry. Earlier Tuesday, Saudi Aramco reported adjusted second-quarter profit of $33.4 billion, up 33% from a year earlier, also benefiting from stronger crude and refined product prices.