BP p.l.c. 2026 Q3 Earnings Call

Thank you, Craig. Energy markets remain volatile, with disruption continuing to reshape commodity and product trade flows. Against that backdrop, we continue to demonstrate the strength of our integrated model, with our upstream, downstream, and trading businesses working together to optimize flows and ensure our customers get the fuels they want and need. Our connectivity, from the reservoir to the fuel pump, is a significant source of strength and resilience, particularly given our ability to connect supply with demand. Our teams have been working hard to maintain safe, reliable, and cost-efficient operations to meet the needs of our customers. We've taken action to improve performance and build a more resilient BP, and we've made good progress, but there's more to do. For example, we've seen an increase in Tier 1 and Tier 2 process safety events this year.

We hold ourselves to high standards on safety, and our performance needs to meet those standards. We are taking actions to learn from each event so we can improve across BP. Last week, we announced an important step for BP, with the agreement with the state of Louisiana to accelerate the delivery of our Deepwater Horizon settlement commitments, providing the state with access to these funds now and strengthening the foundation for our work in the state. Building on this, our intent now is to prioritize the use of excess cash flow to address our remaining Deepwater Horizon liabilities in full. Deepwater Horizon was a tragedy. Eleven men lost their lives, and communities and the environment across the Gulf Coast were impacted. We will never forget. It changed BP. Its legacy guides us in how we operate today, with safety at the heart of everything we do.

The strategy and outlook update in December is an important milestone in updating the market on our next steps to deliver a simpler, stronger, and more valuable BP. We will explain our strategic direction, the business drivers that underpin it, and the financial framework that will guide delivery, and we will set out the metrics and targets that we'll hold ourselves accountable to for delivery. We're looking forward to the event, but for now, let's turn to the third quarter results. This quarter, we delivered a strong set of results. Some of the benefit is associated with the global macro environment, but importantly, improved operational performance allowed us to capture the opportunity. On the headlines, upstream production was 2.2 million barrels of oil equivalent per day, broadly flat on the second quarter.

Upstream plant reliability improved to 95.3%, mainly due to recovery from outages in the North Sea and Indonesia in the second quarter. Refinery throughput was around 1.4 million barrels per day, lower than the second quarter, reflecting the divestment of Gelsenkirchen. Refining availability improved to 96.5%, back above our target of 96%. We delivered $8.5 billion of underlying profit, $2.7 billion higher than the second quarter, and $14.8 billion of operating cash flow, $4 billion higher than the second quarter. Our financial obligations reduced by $9.3 billion compared to the second quarter, and we have announced a dividend per ordinary share of 8.66 cents for the third quarter. While our results were strong, our focus extends beyond any single quarter. Our five priorities are designed to deliver a step change in performance and grow shareholder value.

They will also shape the strategy and outlook update in December. We are making good progress, but have a lot more to do. Starting with the balance sheet, we have delivered our net debt target ahead of plan. At the start of the year, we fully allocated excess cash to strengthening the balance sheet. Combined with strong cash generation in a supportive environment, this has reduced financial obligations by around $16 billion since the first quarter. However, our financial obligations remain too high on an absolute basis and relative to our size. Alongside the announcement regarding our Deepwater Horizon liabilities, we will continue to maintain our focus on reducing our financial obligations. This is an important opportunity to fix the balance sheet, and we intend to do just that. The strong balance sheet sits at the core of our capital allocation framework.

It should provide resilience in a low-price environment while enabling us to deliver stronger returns to shareholders and to invest to grow the business as conditions allow. We have a clear philosophy focused on three priorities. First, we recognize the importance of a committed dividend. This is our first call on cash flow. Our shareholders need to have confidence that we will deliver the dividend through the cycle. Second, the dividend needs to be supported by disciplined through-cycle investment so that we can optimize asset performance and maximize cash flows. As we look to grow the value of the company, we will invest in value-adding growth where we see accretive and distinctive returns. Third, the upside can be shared with shareholders, and we view share buybacks as a tool we can use to reward shareholders as and when appropriate.

This philosophy will guide us as we look forward, and we will provide more detail on this frame in December. Moving on to our second and third priorities, to simplify the portfolio and invest with greater discipline. Over the past six to nine months, we have taken decisions to simplify our portfolio, exiting assets that are not the right strategic or financial fit within our new upstream and downstream organizational model. We launched sale processes for the U.K. North Sea and Archaea. We agreed the sale of our Austria mobility and convenience business, and we completed the disposal of the Gelsenkirchen refinery in the quarter. The completion of the Castrol sale is expected imminently. We are continuing to assess every asset rigorously, whether it can generate competitive cash and returns, whether it competes within the group, and whether BP is the best owner.

Our ongoing review of the portfolio triggered a $4 billion impairment charge in the quarter, mainly in transition businesses. This reflects investments that have not delivered the returns our shareholders should expect and reinforces the need for greater rigor. Portfolio is closely linked to our third priority, investing with greater discipline. During the quarter, we agreed terms to bring partners into Kirkuk in Iraq, Tupinambá in Brazil, and Conifer in the U.S., and signed agreements to advance an offshore gas development in Venezuela. We continue to see a real depth of opportunity in our portfolio, but we need to earn the right to grow. The decisions on what we invest in and what we do not are fundamental to improving the portfolio over time. That means being more rigorous about where we invest, how we stress test decisions for downside resilience, and focus capital on our most competitive opportunities.

I'd like to spend a bit more time on driving operational excellence. With every molecule in demand and with our customers relying on us to reliably maintain supply, the basics of running safe, reliable operations are imperative. In refining, we have been investing in our operations and optimizing ways of working, with a target of keeping availability above 96%. This enables us to run our refineries consistently, meet customer demand, and capture more value. These actions have translated into improving utilization over time, with the first nine months of 2026 at 98%. This supported the realization of almost $2 billion higher refining margin capture this quarter. While operational performance this quarter was strong, sustaining this consistently remains a key focus. In October, we had an unplanned unit outage at our Rotterdam refinery.

Whilst we expect to be back online in early November, this event illustrates the work required to deliver consistently. We have also been focused on safely reducing refining operating costs. This ensures that our portfolio is more resilient to lower margin environments and generates competitive cash flows. The chart shows that cost per barrel has improved, enabled by business improvement plans and delivery of structural cost reductions. Unit cost reductions are also supported by higher throughput due to improved reliability and lower levels of turnaround activity in 2026. The divestment of Gelsenkirchen results in a further step change in the resilience of our portfolio. Of course, there is always more to do as we continue our focus on improving competitiveness. Moving to oil and gas, we are working to ensure that every asset operates safely, reliably, and efficiently.

Across our regions, many assets are performing consistently well and demonstrating what good looks like. However, there are assets where performance has shown far too much variability. Our goal is clear, consistent and strong performance from every asset in our portfolio, driven by stronger accountability and disciplined execution. I want to take a moment to highlight bpx, our U.S. onshore business. In 2023, the bpx team embarked on a journey towards building a culture of ownership. They did this by giving every team member the right data and empowering them to make decisions as if it were their own business. For example, field employees became accountable for specific wells. Armed with data and AI tools to suggest improvements, operators are more proactive about well care and respond more rapidly to issues, which has increased production uptime.

The team has embraced a continuous improvement mindset to help reduce the cost of each barrel, always looking for opportunities to do things in a smarter way. The drilling and completions team are applying the same approach, with a focus on execution speed and efficiency. This includes using standard and repeatable well designs and systematically taking the learnings from each well pad to improve the next. This is an example of the culture of ownership and accountability that we are building across the company. The same operational discipline underpins the work of our trading business. Our global asset base, integrated supply network, and deep customer relationships enables us to respond quickly when markets are disrupted or customer requirements change.

During the quarter, our supply trading and shipping teams used that global reach and flexibility to help support the security of supply for our customers by optimizing volumes across our portfolio. For example, when European aviation markets spiked after Middle East product supply disruptions, we were able to source aviation fuel from the U.S. Gulf Coast to maintain supply to our customers. Also, our highly flexible LNG portfolio helped meet short-notice tenders in South Asian countries to offset the disruption to their long-term supply. This is how we deliver operational excellence for our customers, and it is how trading delivers value for BP, with a 4% uplift to our group return on capital employed on average over the last six years, and so far this year, trending above that rate. Finally, our fifth priority is to hardwire a stronger performance culture across BP, creating clearer accountability for results.