BP plc BP, the UK-based energy major, expects weak first-quarter 2025 results for its natural gas trading business, signaling a challenging start to the year as it shifts its focus back to traditional oil and gas operations.

In a quarterly trading update released on Friday, the company said that the overall upstream production would be lower compared to the prior quarter. While oil production is expected to rise slightly, gas and low-carbon energy output will be lower, reflecting recent divestments in Egypt and Trinidad that closed late last quarter.

The weak performance in natural gas trading stands out in a quarter that is otherwise expected to deliver an “average” result for BP’s oil trading division. BP noted that oil and gas realizations are likely to remain broadly flat on a sequential basis. The Zacks Consensus Estimate for BP’s first-quarter earnings is pinned at 64 cents per share, down from 97 cents in the prior-year quarter.

The setback in gas comes as BP reorients its strategy. In February, the company announced a return to its core strength — fossil fuels — with an emphasis on increasing shareholder returns. Part of that shift includes launching 10 new oil and gas projects globally between 2025 and 2027.

Not all areas of BP’s business are under pressure. The company expects higher refining margins to add between $100 million and $300 million to first-quarter earnings, offering a modest buffer against underwhelming gas performance.

BP also flagged a $4 billion increase in net debt for the quarter, caused by working capital buildup. This rise is largely attributed to seasonal inventory effects, bonus payouts, and payments tied to low-carbon assets held for sale. The company emphasized that much of this increase is expected to reverse in the subsequent quarters.

As part of its February strategy update, BP reaffirmed its target of reducing net debt to the range of $14-$18 billion by 2027, down from the current level of more than $20 billion.

BP’s shift back to oil and gas and its emphasis on project rollouts come amid pressure from investors, including activist hedge fund Elliott, which has urged the company to prioritize shareholder value.

BP is set to release its first-quarter results on April 29, offering more details on how its revised strategy is playing out across its portfolio.

BP’s Zacks Rank & Key Picks

BP currently carries a Zack Rank #3 (Hold).

Investors interested in the energy sector may look at some better-ranked stocks like Archrock Inc. AROC, Kinder Morgan, Inc. KMI and Enterprise Products Partners L.P. EPD. While Archrock presently sports a Zacks Rank #1 (Strong Buy), Kinder Morgan and Enterprise Products carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.

Archrock is an energy infrastructure company based in the United States with a focus on midstream natural gas compression. AROC provides natural gas contract compression services and generates stable fee-based revenues.

Archrock’s earnings beat estimates in three of the trailing four quarters and met once, delivering an average surprise of 8.81%.

Kinder Morgan is a leading North American midstream player with a stable and resilient business model, largely driven by take-or-pay contracts, which ensure consistent earnings and facilitate reliable capital returns to shareholders. KMI operates one of the largest natural gas pipeline networks, positioning it to benefit from the projected increase in U.S. natural gas demand by 2030. 

Kinder Morgan’s earnings beat estimates in one of the trailing four quarters, met once and missed in the other two, delivering an average negative surprise of 1.85%.

Enterprise Products generates stable fee-based revenues from its vast network of oil and gas pipelines spanning 50,000 miles, connecting prolific U.S. shale plays. Notably, the acquisition of Pinon Midstream, which aims to provide services in the prolific Permian Basin, is expected to drive the partnership’s cash flows. This move enhances its NGL value chain and addresses regional infrastructure constraints, with strong customer demand expected to boost revenues.

EPD’s earnings beat estimates in two of the trailing four quarters and missed in the other two, delivering an average surprise of 1.83%.

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