Profit after tax plunged to $1.8 billion in the three months to the end of June compared with $9.3 billion in the second quarter last year, BP said in a statement, mirroring hefty falls across the sector.
"Our financial performance is impacted by fluctuating prices of oil, gas and refined products," it added.
Energy prices soared a year ago following the Ukraine invasion by key producer Russia, sending global inflation to the highest levels in decades while providing record profits for oil and gas companies.
Russia cut gas shipments to Europe while oil markets were also rocked by supply concerns.
Gas and oil prices have since pulled back but remain at elevated levels.
- Shareholder rewards -
Despite the slump in profits, BP said it was hiking its dividend and returning $1.5 billion to shareholders by repurchasing stock.
"This reflects confidence in our performance and the outlook for cash flow," chief executive Bernard Looney said in the earnings statement.
BP's share price advanced 1.9 percent in early London trading following the earnings update.
"BP's move to boost shareholder returns is in line with moves by some of the other leading oil producers as they focus on ensuring investors benefit from the strength of cash flow the industry is currently enjoying," said Steve Clayton, head of equity funds at Hargreaves Lansdown.
Natural gas prices have pulled back sharply as European countries found new suppliers, built up reserves and experienced a mild winter.
Oil prices have also tumbled, partly on fears of falling demand as the global economy slows, with major consumer China's post-Covid recovery stumbling.
Profits remain hefty, however, as oil and gas firms stay focused on pumping out fossil fuels while pivoting toward cleaner energy.
The UK government said Monday that it would issue "hundreds" of new oil and gas licences in the North Sea to secure energy reserves while still aiming for net zero carbon emissions by 2050.
The announcement has angered environmental groups.
"Handing out new oil and gas licences will do nothing to improve our energy security," Charlie Kronick, senior climate advisor at Greenpeace UK, said Tuesday.
He added in a statement that it would instead allow "companies like BP and Shell to rake in even more money for their shareholders".
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