BP profit doubles as strategy tightens

BP has reported second-quarter underlying replacement-cost profit of $5.73bn as chief executive Meg O’Neill moved to strengthen the energy group’s finances, simplify its portfolio, and improve operational discipline.

The result was more than double the $2.35bn recorded in the corresponding quarter last year and exceeded the $5.11bn average forecast in a company-compiled poll of analysts. Higher energy prices, stronger refining margins, and trading performance contributed to the increase.

BP raised its quarterly dividend by 4% to 8.66 cents per ordinary share. It also narrowed expected capital expenditure for 2026 to between $13.5bn and $14bn as management applies stricter tests to investment decisions.

The financial improvement gives O’Neill greater room to reshape the group after taking charge in April. She has identified five immediate priorities: strengthening the balance sheet, simplifying the portfolio, tightening investment discipline, improving operations, and creating clearer structures for decision-making and accountability.

O’Neill said: “Our performance over the past few years has not met our own expectations, let alone those of our shareholders.”

The assessment places execution and financial resilience at the centre of BP’s next phase. The group has faced sustained investor pressure over returns, debt, spending decisions, and the performance of investments made during its earlier expansion into low-carbon energy.

BP has launched a process to market Archaea Energy, its US renewable natural gas business, for a potential sale. The group acquired the company in 2022 in a transaction valuing it at about $4.1bn, making Archaea one of the largest purchases completed under BP’s previous transition strategy.

The process follows other portfolio actions, including the sale of the Gelsenkirchen refinery in Germany, the disposal of an Austrian retail operation, and preparations to sell BP’s UK North Sea business. The group is working towards a wider divestment target of $20bn by the end of 2027.

Those sales are intended to concentrate capital on assets where BP believes it has a stronger competitive position and more attractive returns. They should also support debt reduction and reduce liabilities that management considers excessive for a more difficult commodity-price environment.

BP expects net debt to reach its target range of $14bn to $18bn earlier than originally planned. O’Neill has nevertheless indicated that the combined total of net debt, hybrid bonds, and other liabilities — expected to stand at around $40bn at the end of the year — remains too high.

The second-quarter result was supported by market conditions that may not persist. Oil and gas prices rose as conflict involving Iran disrupted energy flows and tightened supply, while volatility created opportunities for trading businesses. Refining margins also strengthened during the period.

Stronger commodity markets have improved cash generation across the energy sector, but they make it harder to separate structural progress from temporary pricing effects. BP’s ability to sustain higher returns will depend on operating reliability, cost control, portfolio quality, and investment outcomes when conditions are less supportive.

The strategic reset also marks a further retreat from the breadth of BP’s previous low-carbon programme. The company has recorded substantial impairments against transition-related investments and is directing more attention towards oil, gas, refining, trading, and businesses capable of meeting stricter return thresholds.

The Archaea sale process shows how management is separating an asset’s environmental characteristics from its place within BP’s financial framework. Renewable natural gas remains a growing market, but the business requires capital that BP has decided could produce stronger returns elsewhere.

Stricter investment discipline could support shareholder returns and balance-sheet repair, although repeated disposals carry execution risks. BP must secure acceptable valuations, manage separation costs, and retain the operational capabilities required by the remaining business.

The profit increase gives O’Neill a stronger starting position. Future performance will be judged on whether the five priorities produce more consistent operations, fewer write-offs, lower liabilities, and clearer evidence of disciplined capital allocation across changing energy markets.