BP p.l.c. 2026 Q2 Earnings Call

Thanks, Craig. Just a few weeks ago marked my 100th day as CEO of BP. This has coincided with one of the most volatile periods within global energy markets. When the conflict in the Middle East disrupted global oil and gas supply, the BP team responded, keeping energy flowing across the world safely, reliably, and efficiently. I want to start with an update on safety. Over the past four months, I've seen a deep commitment to safety across BP. It comes first, always. Performance in the first half of the year has not been where it needs to be. Tragically, a Castrol colleague died following an incident at the Gemlik blending plant in Türkiye in April. Our thoughts remain with their family, friends, and colleagues. An investigation is underway to understand what happened. We will learn and apply those lessons to improve our business.

On process safety, we saw an increase of events in the first half of 2026 when compared with the same period in 2025, including an increase in Tier 1 events. Nothing is more important than the safety of our people. Operational excellence is foundational to what we do. This begins with consistent, safe performance. Our safety goal remains to eliminate fatalities, life-changing injuries, and Tier 1 process safety events across our operations. Turning to second quarter results, we demonstrated strong financial delivery and progress towards our 2027 targets. There are also areas where performance has been below where it needs to be. On the headlines, upstream production was 2.2 million barrels oil equivalent per day.

This was 6% lower than the first quarter, driven by scheduled seasonal maintenance, predominantly in the U.S. Gulf of Mexico, disruptions in the Middle East, and some operational issues in the North Sea and Indonesia. This was partly offset by stronger performance at bpx energy. Refining throughput was around 1.5 million barrels per day. This was 4% lower than the first quarter, due primarily to higher planned turnaround activity and lower refining availability. We delivered $5.7 billion of underlying profit, $2.5 billion higher than the first quarter, and $10.9 billion of operating cash flow after a $1 billion working capital build. Financial obligations, including net debt, hybrids, and U.S. Gulf of Mexico settlement liabilities, reduced by around $7 billion compared to the first quarter. Today, we have announced a 4% increase in the dividend per share.

Before I hand over to Kate to go into our 2Q results in more detail, I would like to share my reflections of the business and our direction of travel. Alongside working with the leadership team to manage the business, I've spent significant time with BP's teams on the ground. I've also spoken with investors, business partners, governments, and other key stakeholders. I came to BP because I believe this company can be extraordinary, and I've seen enough in four months to know that's true. When you combine great assets with great people who are ready to step up, you get a company with real potential. I believe our integrated model is a source of competitive advantage. The combination of upstream and downstream, supported by trading, gives BP an earnings and cash flow profile that is more resilient through the cycle, with greater flexibility to capture value across markets.

Our performance over the past few years has not met our own expectations, nor the expectations of our shareholders. We have not delivered consistently enough across our operations. We have written off too much shareholder value, and we face a challenge of liabilities and costs that means our resilience to a low price environment is insufficient, exacerbated by a portfolio that is too stretched and too complex. To achieve consistently strong performance, we have to challenge ourselves. We must hold up a mirror and be honest about what we see, be proud of our strengths, and do the work to identify and address our weaknesses. We must deliver at pace, with urgency, and with deep accountability for the decisions we make. Going forward, every part of the company needs to earn its place, generating cash, improving returns, and strengthening the whole.

We need to improve the quality of our earnings and cash generation and unlock more value for shareholders That is why I am setting five priorities to deliver a step change in performance and to grow shareholder value. The first priority is strengthening the balance sheet. We are making progress, but we are not where we need to be. Too much cash is currently being used to service liabilities. I want more of the value proposition to move back to equity holders through growth, distributions, or both. As a starting point, that means reducing financial obligations relative to our scale to at least in line with our European competitors. A stronger balance sheet gives us more resilience, more flexibility, and greater capacity to create value through the cycle. Second, we will simplify and focus the portfolio.

As we high grade, we will do so based on value creation, not sentiment, not history, and not legacy attachment. Some assets may have been important to BP in the past. That does not necessarily mean they are the right assets for BP's future. We are in action. We plan to market our U.S. renewable natural gas business, Archaea Energy, and we recently launched a process to market our North Sea business. I'll come back to talk more about portfolio shortly. Third, we will invest with discipline and drive capital efficiency. Every dollar of capital has to compete, and we need to get fit to grow. We need to compete in the weight class we are in, focusing capital on our best opportunities to maximize cash flow and returns. Our decision to exit Bay du Nord shows that discipline in action.

Fourth, we need to run our assets safely, reliably, and with greater cost efficiency. We have made progress on structural costs, but interventions to date have not delivered sufficient savings to the bottom line. That's what matters, and we have more to do. The opportunity is to use technology, simplification, and organizational redesign to build a more competitive BP. Kate will talk more about costs shortly. Finally, we must tackle culture to enable faster, more effective decision-making and greater accountability for results. I want challenge to be welcomed, disagreements surfaced early, and decisions to be rigorous, evidence-based, and accountable. Reorganizing into upstream and downstream is an important first step on this journey. Portfolio optimization is central to building a simpler, stronger, and higher value BP. The data on this slide gives an illustrative view of free cash flow and returns from our assets over the past three years.

It does not capture the through-cycle value of every business or the additional value created through integration and trading for all assets. As with capital allocation, we consider a broader set of factors, including strategic alignment, optionality, and sustainability. It does show the value lens we are applying across BP. We have assets and businesses that generate attractive returns, material free cash flow, and strategic value for the group. We also have variability, with some assets consuming capital, adding complexity, or diluting returns without generating enough cash flow. We are taking an objective view, asset by asset, business by business, looking at cash generation, returns, capital efficiency, and strategic fit. Upstream is anchored by material positions, including in the U.S. and the Middle East, advantaged basins where we have scale, deep technical capability, and strong relationships.

I'm convinced that BP has the potential to be one of the best upstream businesses in the industry. Major projects sanctioned for startup between 2028 and 2030 are progressing according to schedule. Sanctioning projects is not the proof point, delivery is. Executing these projects safely, on time, and on budget is what investors expect from BP, and it is a core measure of how we will rebuild confidence. Downstream is a strategically important business, bringing scale, diversification, and resilience to the group earnings and cash flow. Regional integrated value chains link refining, logistics, trading, and customer channels to capture value across the system. During recent volatility, that helped secure supply and keep products flowing to customers. The model varies by market, but the principle is the same. The system is strongest when it works together. Cherry Point on the U.S. West Coast is a good example.

Its coastal position gives access to global crude markets, feedstock flexibility, export capability, and market optionality. Our customer channels, retail, aviation, and B2B, provide stable offtake and a strong return on capital. There are also areas to improve, including reducing total cash cost relative to gross margin and targeted performance programs in businesses like TravelCenters of America. We will continue to assess and divest assets that do not provide integrated value or dilute our margin profile, as we have with the announced sale of Austrian Mobility and Convenience and Gelsenkirchen Refinery. The point of optimization is not simply to reduce the number of assets.

It is to focus capital on activities that can generate stronger cash flow, better returns, and greater value through the cycle and taking action where they do not. Assets matter, but it's our portfolio, combined with a world-class trading organization, that provides differentiated value for BP. Supply, trading & shipping connects the system, enabling us to source supply, manage disruption, access demand growth, and direct molecules to the highest value markets. We have built deep capability across regions, products, and markets over decades, and now operate a trading business of significant scale. That scale and diversification matters. We are not dependent on any one region, asset, or market condition to create value. Our track record is strong.