BP’s Trading Windfall Meets a $27 Billion Debt Test as New CEO Reshapes the Company

BP faces Q1 2026 with strong oil trading profits near $118/barrel, but net debt could hit $27 billion amid restructuring and a pivot back to oil and gas.

The oil giant is barreling toward its first-quarter earnings report with a potent mix of tailwinds and internal turbulence. While BP’s trading desk is riding a geopolitical oil price surge that has Brent crude hovering near $118 a barrel, the company is simultaneously navigating a radical internal restructuring and a ballooning debt load that threatens to overshadow the profits.

Analysts at Citigroup have raised their first-quarter net income estimate to $2.6 billion, fueled by the near-total closure of the Strait of Hormuz amid the Iran conflict. That disruption knocked more than 10 million barrels per day off global supply in March, creating a windfall for traders at the major oil producers. The strong performance in oil trading is expected to be a standout feature of the results, with BP’s management already signaling an exceptionally strong quarter from that division.

However, the higher oil price environment comes with a sting. The buildup in net working capital is expected to push BP’s net debt to as much as $27 billion, a sharp jump from roughly $22 billion at the end of 2025. That debt surge is one of several factors tempering investor enthusiasm, alongside recent write-downs and the suspension of share buybacks.

A Strategic U-Turn That Has Investors Uneasy

Chief Executive Meg O’Neill, who took the helm just months ago, is moving quickly to overhaul BP’s structure. She is dismantling the previous model and replacing it with a classic two-part division: upstream production and downstream refining and retail. The standalone unit for gas and low-carbon energy is being eliminated, a clear signal that the company is pivoting back to its traditional oil and gas roots.

The move has unsettled some institutional investors, who worry that the profitability of individual business lines will become harder to track. Chairman Albert Manifold has defended the strategy, arguing that rapid cost cuts are essential to end BP’s chronic underperformance relative to its peers. The company is targeting structural cost reductions of up to $7.5 billion by 2027.

Refining Margins and a German Exit

On the operational front, BP faces headwinds in the US, where its Whiting refinery in Indiana is in its second month of a lockout involving roughly 800 union workers. The plant continues to operate with temporary staff. Yet the refining division is getting a significant boost from improved margins, which rose to $16.90 per barrel in the first quarter from $15.20 in the previous three months. That increase alone could add up to $200 million to the division’s bottom line.

Meanwhile, BP is pressing ahead with portfolio sales. The company has reached an agreement with the Klesch Group to sell its Gelsenkirchen refinery in Germany, along with the Bottrop tank farm and other logistics and distribution assets. The deal is expected to close in the second half of 2026, subject to regulatory approval, and should reduce operating costs by roughly $1 billion. It is part of a broader divestment program totaling $20 billion, more than half of which management has already initiated or completed.

A Stock Rally That Has Analysts Cautious

BP’s shares have surged more than 29% since the start of the year, hitting €6.57, and have outpaced rivals such as Shell, Exxon Mobil, and Chevron. But the rally has pushed the relative strength index above 83, a level that signals the stock is heavily overbought. Market observers note a growing wariness among investors ahead of the earnings release.

Several investment banks have nevertheless raised their price targets. RBC Capital lifted its target for the London-listed shares from 640 pence to 700 pence, while Scotiabank set a fair value of $58 and maintained an “Outperform” rating.

When BP reports its official first-quarter numbers on April 28, O’Neill will need to convince the market that the trading bonanza can outweigh the mounting debt and the strategic uncertainty. The earnings call will be her first major test since taking charge, and the stakes could hardly be higher.