BP Q1 Earnings Call Highlights

Key Points

• Strong Q1 results: BP reported underlying net income of $3.2 billion, operating cash flow excluding working capital of $8.9 billion, and declared a dividend of $0.0832 per ordinary share.
• Resilient operations: Upstream production was 2.3 million boe/d and downstream refining availability exceeded 96% with throughput above 1.5 million bpd, BP’s highest quarterly throughput in four years.
• Balance-sheet and outlook: A $6.0 billion working-capital build reduced reported operating cash flow to $2.9 billion, net debt rose to $25.3 billion, buybacks remain suspended, and BP plans to cut hybrid bonds by about $4.3 billion by end-2027 while flagging potential lower full-year upstream production from Middle East disruptions.

BP NYSE: BP reported what executives described as a strong first quarter of 2026, highlighting resilient upstream production, improved refining performance, and higher underlying earnings versus the prior quarter amid heightened commodity-market volatility tied to disruptions and geopolitical tensions in the Middle East.

Leadership transition and operating backdrop

Chief Executive Officer Meg O’Neill, appearing in the role for the first time on the quarterly update, said she sees “real scale, optionality, and significant opportunity” at BP and emphasized execution, safety, and operational excellence. O’Neill noted the company is operating in an environment marked by “geopolitical tension, supply disruption, rapid technological change, and shifting global energy demand.”

Chief Financial Officer Kate Thomson said BP’s “main priority” in the Middle East remains the “safety and well-being of our people in the region,” adding that business response teams are supporting personnel and monitoring potential disruptions.

First-quarter financial performance

Thomson said BP delivered $3.2 billion of underlying net income for the quarter, “significantly higher than the fourth quarter,” and $8.9 billion of operating cash flow excluding working capital movements. BP declared a dividend of $0.0832 per ordinary share.

On an IFRS basis, BP reported $3.8 billion of profit for the quarter, which Thomson said included $3.2 billion of inventory holding gains and around $2.5 billion of adverse adjusting items across segments, including about $400 million of post-tax net impairments.

Segment and group metrics highlighted by Thomson included:

• Group underlying replacement cost (RC) profit: $3.2 billion
• Group underlying RC profit before interest and tax: $6.3 billion (up from $4.4 billion in the prior quarter)
• Underlying finance costs: around $1 billion
• Underlying effective tax rate: 32% (down from 43%, reflecting geographic mix)
• Non-controlling interests: around $370 million

Operational highlights and segment commentary

BP reported upstream production of 2.3 million barrels of oil equivalent per day, which Thomson described as resilient. She attributed the performance to “continued high plant reliability, higher production in the Gulf of America, and strong performance in BPX,” while noting this offset disruptions in the Middle East and divestment impacts.

In downstream, Thomson said refining availability exceeded the company’s target for the fifth consecutive quarter, with availability above 96%. Refining throughput exceeded 1.5 million barrels per day, which she said was BP’s “highest quarterly figure in four years.”

By segment, Thomson said:

• Gas & Low Carbon Energy delivered an underlying result of $1.3 billion, compared with $1.4 billion in the fourth quarter, reflecting “broadly flat realizations” and an average gas marketing and trading contribution. She also cited an adverse impact of around $200 million from price lags versus BP’s “rules of thumb.”
• Oil Production & Operations posted an underlying result of $2.0 billion, flat quarter over quarter. Thomson said divestment of “Coleen in the North Sea” was offset by higher realizations, while price lags created an adverse impact of around $700 million.
• Customers & Products improved sharply, with Thomson saying the underlying result was about $1.9 billion higher than the previous quarter. Within Customers, the underlying result was $1.0 billion versus $0.9 billion, with lower seasonal volumes and lower retail fuel margins “more than offset” by higher midstream performance, one-off timing effects, and lower underlying operating expenditure.
• In Products, the underlying result was $2.2 billion versus $0.5 billion in the fourth quarter, driven by “higher realized refining margins, higher throughput, and crude selection timing effects.” Thomson added the “oil trading contribution was exceptional,” while cautioning that trading results vary quarter to quarter.

Cash flow, working capital, and balance sheet actions

Operating cash flow was $2.9 billion, down from $7.6 billion in the fourth quarter, primarily due to a $6.0 billion working-capital build. Excluding working capital movements, adjusted operating cash flow rose to $8.9 billion from $6.7 billion, which Thomson said reflected improved cash conversion.

Thomson broke down the working-capital build into:

• $4.1 billion from seasonal effects, including downstream inventory builds ahead of anticipated demand and higher inventory in transit, plus impacts from a rising price environment. She said BP expects around half of this amount to unwind over the remainder of the year, “with the majority over the next two quarters,” while the remainder depends on how the Middle East situation evolves.
• $1.1 billion related to payment timing, expected to reverse “over the normal course of business.”
• $800 million of other items, “primarily related to the Gulf of Mexico settlement payments,” which do not reverse.

Capital expenditure was $3.3 billion in the quarter, and BP maintained full-year capex guidance of $13.0 billion to $13.5 billion. Shareholder distributions totaled $1.8 billion, including about $500 million to complete a share buyback program announced in November 2025. Thomson reiterated that, as announced in February, share buybacks have been suspended.

BP made $1.0 billion of payments related to lease liabilities and hybrid bonds. Net debt increased by around $3.0 billion to $25.3 billion at quarter-end.

Thomson also outlined a plan, subject to market conditions, to reduce hybrid corporate bond financing by around $4.3 billion by the end of 2027 from a current balance of $13.3 billion. After the planned actions, BP expects $9 billion of corporate hybrid bonds to remain as a “permanent component” of the capital structure.

Middle East exposure and outlook

Addressing business implications from the Middle East, Thomson said BP has exported around 100,000 barrels per day of Middle East liftings via the Strait of Hormuz on average, including barrels from Iraq and part of Abu Dhabi onshore, with the balance of Abu Dhabi production entitlement typically lifted from the Fujairah terminal. For LNG, she said around 5% to 10% of BP’s portfolio has been sourced from the Middle East region.

Thomson said commodity volatility created notable differences between market prices used in BP’s “rules of thumb” and realized prices due to factors including “price lags, price caps, timing of liftings, and contract structures.” She noted, for example, that some Gulf of America sales are priced on a one-month lag, meaning March prices would be captured in second-quarter results. In refining, she pointed to margin dislocations tied to crude differentials, product yields, and freight costs, adding that if current conditions persist, BP could see the gap between its Refining Indicator Margin and realized margin widen to more than $5 per barrel, depending on how the situation unfolds.

Looking to the second quarter versus the first, Thomson said BP expects reported upstream production to be lower due to seasonal maintenance in the Gulf of America and the effects of Middle East disruptions, and noted price volatility could impact PSA contracts. In Customers, she said seasonally higher volumes are expected to be more than offset by a lower midstream result, including the potential reversal of a first-quarter timing effect. In Products, she said refining throughput is expected to be impacted by more planned turnaround activity and lower throughput at Whiting due to a third-party event that “has now been resolved.”

For full-year 2026, Thomson said BP now expects reported upstream production to be lower due to the effects of Middle East disruption, while “all other full-year guidance remains unchanged.” She reiterated that “excess cash will be fully allocated to accelerate the strengthening of our balance sheet.”

In closing remarks, O’Neill said her immediate priority is to “accelerate our progress,” with a “tight focus on safety, operational performance, and capital discipline,” while continuing to strengthen the balance sheet. She also said she intends to organize BP with a defined upstream and downstream, a change she said is meant to improve accountability, simplify decision-making, and “empower” teams, with further updates to come.

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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