BP PLC reported a surge in quarterly profits, driven by strong oil trading results and higher energy prices, while also announcing plans to sell its US biogas business as part of a renewed strategic focus on fossil fuels.

The British energy giant posted a second-quarter underlying replacement cost profit, a metric similar to net income reported by US oil companies, of $5.73 billion, a significant jump from $3.2 billion in the first quarter. The conflict between the US and its allies and Iran has now entered its sixth month. Higher prices, soaring refining margins, and market volatility have generated substantial earnings for oil majors.

For BP PLC, the Middle East war has provided a cash boost, which the company is using to strengthen its balance sheet. Its commitment to reducing net debt coincides with stricter spending guidelines and a target of $20 billion in asset sales by the end of 2027. The company stated on Tuesday that it plans to sell its US biogas business, Archaea, which it acquired for $4.1 billion in 2022. It has since significantly written down the value of that business. Last week, it announced plans to sell its oil and gas operations in the UK North Sea.

The group recorded $680 million in impairments on its gas and low-carbon business, including Archaea, in the most recent quarter. New Chief Executive Officer Meg O’Neill, who took office this year partly to reverse the trend of moving into renewable energy and refocus the company on its traditional oil and gas operations, is reviewing BP PLC's portfolio. She is implementing a strategic shift to boost profits. O’Neill said on Tuesday that the company still needs to improve its balance sheet and is taking “urgent action” to create long-term value for shareholders.

“Our performance has been inconsistent; we have written off too much value; our costs and liabilities are not resilient enough in a low-price environment,” O’Neill stated. Despite this, profits have jumped again, with BP PLC’s customers and products division, which includes its oil trading desk, reporting another quarter of robust earnings. BP PLC's energy traders hedge the company's oil, gas, and power production and engage in speculative positions within the company's risk limits. Their strong performance follows similar results from peers like Shell and France’s TotalEnergies, which also reported strong trading profits.

Before the US and Israeli attacks on Iran in late February, roughly one-fifth of the world's oil supply was transported through the Strait of Hormuz. The subsequent closure of the strait pushed up oil and gas prices and sparked a market scramble for jet fuel and diesel. This scramble for fuel also boosted BP PLC's refining margins. However, the company stated that more work is needed to achieve consistent operational performance at its refineries. In afternoon trading on the London Stock Exchange, BP PLC shares rose 1.5% to 560.40 pence.