BP (NYSE:BP) said its second-quarter financial performance and cash conversion helped reduce net debt by $3 billion from the prior quarter, while total financial obligations have fallen by about $7 billion since the first quarter, as the company pursues a more focused portfolio and stronger balance sheet.
Chief Executive Officer Meg O’Neill said the company is building momentum but acknowledged that operational performance did not meet expectations during the quarter. BP is pursuing what O’Neill described as a “Fit to Grow” agenda centered on balance-sheet improvement, portfolio simplification, disciplined investment, cost reductions and sharper accountability.
Portfolio simplification and asset sales
BP said it has continued to simplify its business through actions involving its North Sea operations, Archaea Energy and the completed Gelsenkirchen transaction. O’Neill said the company is reviewing assets based on free-cash-flow growth, returns and their effect on group return on capital employed, rather than historical attachment to businesses.
“Nothing is sacred. Nothing is off the table,” O’Neill said, while stressing that decisions will be guided by rigorous financial analysis.
Regarding the North Sea, O’Neill said BP’s intention is to market the business for a full divestment after receiving inbound interest and evaluating a range of potential structures. She said the company must decide where to focus leadership attention and capital.
Chief Financial Officer Kate Thomson said BP generated $5.3 billion of divestment proceeds last year and is guiding for $8 billion to $9 billion this year. The company expects to reach approximately $15 billion to $16 billion of proceeds by year-end. However, Thomson said BP is not pursuing asset sales simply to reach its previously communicated $20 billion target by the end of 2027.
“We’re not selling assets at any price to hit a divestment target,” Thomson said. Instead, she said the company is focused on using divestments to strengthen its balance sheet and financial resilience.
BP also announced its intention to divest Archaea Energy. O’Neill said BP can continue to access lower-carbon molecules without committing as much capital as required by the Archaea business. She contrasted that model with BP’s U.S. biofuels trading and blending activities, which she said can offer value through a more capital-light approach.
Debt reduction and capital discipline
Thomson said BP expects total financial obligations to fall to between $39 billion and $41 billion by the end of 2026. The company redeemed $2.9 billion of hybrid bonds in the second quarter and expects $1 billion of hybrids to be naturally redeemed in the third quarter. Another $1.4 billion is expected to roll off when it matures in the second quarter of next year.
Thomson said BP does not currently see a reason for capital expenditures to rise in future years. The company’s higher second-half capital-spending run rate partly reflects its decision to defer a planned farm-down of its U.S. Paleogene assets, as BP seeks a partner that can add value and pay appropriate consideration.
O’Neill said the Paleogene portfolio, including the sanctioned Kaskida and Tiber-Guadalupe developments, is a significant long-term opportunity. The two developments are expected to commercialize more than 500,000 barrels of oil, she said.
Management said it remains focused on putting the balance sheet in a position to support investment and shareholder rewards through market cycles. O’Neill said BP still has work to do before outlining a broader financial framework for shareholder distributions, including potential buybacks.
Cost reductions and operational reliability
BP said it has line of sight to reducing its absolute cost base to about $18 billion by the end of next year, compared with $22 billion in 2025. Thomson said this would represent $5.8 billion of structural cost reductions, above the company’s original $4 billion to $5 billion target.
However, management said savings have not moved quickly enough to offset pressures from inflation, foreign exchange and activity choices. O’Neill said the organizational changes and simplified structure are expected to begin contributing more visibly to bottom-line improvement in 2027.
Upstream plant reliability declined to 92.4% in the quarter, while refining availability fell to 94.7%. O’Neill attributed the upstream decline to issues at the Glen Lyon floating production facility and ETAP operations in the North Sea, as well as an extended turnaround and restart challenges in Indonesia. A third-party event at BP’s Whiting refinery also caused downtime in April.
O’Neill said BP is conducting investigations into the events and reviewing whether its global operating framework gives teams the tools necessary to deliver more reliable performance.
Growth priorities in the U.S. and upstream
BPX, the company’s U.S. onshore business, produced 545,000 barrels of oil equivalent per day in the second quarter and continues to grow quarter over quarter, O’Neill said. She emphasized the value of BPX’s short-cycle investment opportunities compared with multiyear deepwater developments.
The Haynesville position remains significant, according to O’Neill. She said a BPX well set a basin 24-hour initial production-rate record of 81 million standard cubic feet per day during the first quarter, with a 15,000-foot lateral. The well continued producing 63 million standard cubic feet per day for more than 80 days.
BP expects no major final investment decisions this year, following a more active 2025. The company is preparing an appraisal campaign for the Bumerangue discovery in Brazil, expected to begin late this year or early next year. O’Neill said the 2025 discovery has 8 billion barrels of liquids in place, though further work is needed to understand reservoir flow characteristics.
Looking ahead, O’Neill identified the U.S. as BP’s leading growth market, citing both its offshore Paleogene developments and BPX operations. She also pointed to downstream and trading in the U.S., the Kirkuk development in the Middle East and Bumerangue in Brazil as areas with growth potential.
For the long-term measure of success, O’Neill said BP will focus on operational safety and reliability, but ultimately on total shareholder return through share-price appreciation and dividend distributions.
About BP (NYSE:BP)
BP plc is a British multinational integrated energy company headquartered in London. Originating in the early 20th century as the Anglo-Persian Oil Company, BP has grown into one of the world’s largest oil and gas companies, operating across exploration and production, refining and marketing, trading, and a range of low-carbon businesses.
The company’s core activities include upstream exploration and production of crude oil and natural gas, midstream and trading operations, and downstream refining, marketing and supply of fuels, lubricants and petrochemicals.
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