Profits and cash flow rebound sharply

Financially, the hydrocarbons giant is in excellent shape over this three-month period.

Underlying replacement cost (RC, net profit) profit for the quarter came in at $5.7bn, topping the analyst consensus by 11%. This result jumped 79% from the previous quarter ($3.2bn) and more than doubled year on year ($2.35bn). The increase mainly reflects better realized prices for oil and gas (benefiting from favorable timing effects), a sharp rise in refining margins, and very strong results in the Customers business - processing the commodity and selling it to the end customer - (higher seasonal volumes and strong performance at Castrol: one of bp's most profitable subsidiaries, a global unit specializing in the manufacture and marketing of lubricants - motor oils, transmission fluids, industrial fluids).

Profit attributable to shareholders totaled $3.9bn versus $3.8bn in Q1 2026. The gap versus underlying profit reflects $1.1bn in net adjustments (including $800m in asset impairments) and $700m in accounting losses on inventory holdings.

Operating cash flow in the second quarter rebounded spectacularly to $10.9bn, about $8bn more than in the previous quarter, This increase directly reflects the rise in earnings and, above all, a much smaller build in working capital (WC) ($1bn in Q2 versus a heavy impact in Q1).

This strong cash generation allowed bp to accelerate deleveraging: net debt fell to $22.3bn (from $25.3bn three months earlier), helped by robust cash generation during the quarter, despite the repayment of $2.9bn in hybrid bonds (€2.5bn). At the same time, the group rewarded shareholders by raising its quarterly dividend by 4%, to $0.866 per share.

Operations: the CEO's blunt honesty

Despite a solid quarter, bp CEO Meg O'Neill delivered a reality check, highlighting the company's operational weaknesses: "Our facilities did not perform as well as in the previous quarter. Reliability at our upstream sites was 92.4%, versus 95.7%. Production fell and our refineries processed less crude partly because of planned maintenance and the conflict in the Middle East."

Saying that "bp has not delivered consistent results in recent years and has written off too much value, the chief executive set five priorities to "step up performance and increase shareholder value":

- strengthen the balance sheet and accelerate deleveraging.
- simplify the asset portfolio without dogma.
- impose strict capital discipline on investments
- target operational excellence in the field
- embed these changes over time (hardwired)

As part of this refocusing, bp is continuing its clean-up. After selling its German Gelsenkirchen refinery and its service stations in Austria, the petroleum products distributor is preparing the sale of its UK North Sea assets as well as its US biogas subsidiary, Archaea.

2026 outlook: focus on debt, forecasts revised

For the remainder of fiscal 2026, bp has adjusted its roadmap.

The target of bringing net debt to between $14bn and $18bn should be reached a year ahead of the original schedule, supported by the planned repurchase of $1bn of hybrid securities in the third quarter.

bp expects to spend slightly more than planned ($13.5bn to $14bn versus the initial $13bn to $13.5bn).

The group expects to take in slightly less cash from subsidiary/asset sales ($8bn to $9bn instead of $9bn to $10bn).

In addition, it is now pointing to lower upstream production. Output is expected to range between 2.18m and 2.27m barrels of oil equivalent per day (mboe/d), down versus 2025 (2.31 mboe/d) and about 2.5% below market expectations. It should be affected by geopolitical disruption in the Middle East, the sale of the Culzean gas field in the UK North Sea, the reduction of its stakes in Latin America, and potential seasonal weather events in the Gulf of America (impact estimated at about 15 kboe/d).

Underlying upstream production should be broadly stable versus 2025, as should oil and operational production. By contrast, gas and low-carbon energy production is expected to decline.

The effective tax rate has been revised lower (35-40% versus about 40% previously). The decline stems from a shift in the geographic mix of expected profits over the year, which will mechanically have a positive effect on final net profit.