Introduction & Market Context
BP PLC (NYSE:BP) delivered a robust first quarter 2026 performance on April 28, 2026, with underlying replacement cost profit more than doubling to $3.2 billion despite navigating significant geopolitical turbulence in the Middle East. The presentation, led by newly appointed CEO Meg O’Neill and CFO Kate Thomson, outlined strong operational execution across the company’s integrated portfolio while commodity prices experienced dramatic swings throughout the quarter.
The quarter was marked by extreme volatility, with Brent crude prices fluctuating from just above $70 per barrel in early February to over $130 per barrel in late March before settling around $110 per barrel in April. This volatility stemmed from escalating tensions in the Middle East and supply disruptions affecting energy flows through the Strait of Hormuz, where approximately 100,000 barrels per day of BP’s production is exported.
Quarterly Performance Highlights
BP’s first quarter results demonstrated the strength of its integrated business model, with underlying replacement cost profit reaching $3.2 billion compared to $1.5 billion in the fourth quarter of 2025 and $1.4 billion in the prior year period. The company maintained upstream production at 2.3 million barrels of oil equivalent per day, consistent with the previous quarter, while achieving improved operational reliability metrics.
As shown in the following performance dashboard, BP delivered strong results across multiple operational metrics while navigating external challenges.
Upstream plant reliability improved to 95.7% from 95.4% in the fourth quarter, while refining availability reached 96.3%, marking the fifth consecutive quarter above the company’s 96% target. Notably, refining throughput exceeded 1.5 million barrels per day, representing the highest quarterly figure in four years.
The company announced a dividend of 8.32 cents per ordinary share, maintaining its commitment to shareholder returns despite increasing net debt. Adjusted operating cash flow before working capital movements reached $8.9 billion, up from $6.7 billion in the prior quarter.
Detailed Financial Analysis
The dramatic improvement in quarterly earnings was primarily driven by BP’s Customers & Products segment, which delivered underlying replacement cost profit before interest and tax of $3.2 billion, up sharply from $1.3 billion in the fourth quarter. The Products business alone contributed $2.2 billion, compared to just $500 million in the prior quarter, benefiting from higher realized refining margins, increased throughput, and what the company described as “an exceptional oil trading contribution.”
The following chart illustrates the detailed breakdown of BP’s underlying results across its business segments for the first quarter.
The refining indicator margin averaged $16.9 per barrel during the quarter, up from $15.2 per barrel in the fourth quarter and significantly higher than the $8.1 per barrel recorded in the first quarter of 2025. Brent crude averaged $81.1 per barrel for the quarter, though this masked considerable intra-quarter volatility.
However, the strong earnings performance was partially offset by a significant working capital build of $6.0 billion, which reduced operating cash flow to $2.9 billion. The working capital movement comprised $4.1 billion in seasonal effects and pricing impacts, $1.1 billion in timing of payments, and $800 million related primarily to Gulf of America settlement payments.
The following breakdown illustrates the components of the working capital build and management’s expectations for reversal.
Net debt increased by approximately $3 billion during the quarter to $25.3 billion, reflecting the working capital build and continued capital allocation priorities. The company utilized $3.3 billion in capital expenditure and distributed $1.8 billion to shareholders, including approximately $500 million to complete the share buyback program announced in November 2025. BP has since suspended share buybacks, as announced in February, to focus on balance sheet strengthening.
The waterfall chart below demonstrates how BP’s net debt moved during the first quarter across various cash flow categories.
Geopolitical Impact & Price Volatility
The Middle East situation created both challenges and opportunities for BP during the quarter. The company’s exposure includes approximately 411,000 barrels of oil equivalent per day of upstream production in the region, comprising operations in Abu Dhabi (208 mboed), Oman (124 mboed), and Iraq (79 mboed through equity-accounted entities).
CFO Kate Thomson emphasized that “the safety and wellbeing of BP’s people in the region remain their main priority,” with business response teams actively supporting personnel and managing disruptions. The integrated model allowed BP to respond promptly to tightening conditions and shifting flows, helping ensure energy reached customers effectively.
The following chart illustrates the dramatic price volatility experienced during the quarter across crude oil, natural gas, and refined products.
Price lag effects significantly impacted reported results, with Gas & low carbon energy experiencing an adverse impact of approximately $200 million and Oil production & operations facing roughly $700 million in negative price lag effects. The company noted that realization of these price lags will be subject to future volumes and prices, with March pricing expected to flow through to second quarter results due to the one-month lag on Gulf of America sales.
The presentation included detailed analysis of BP’s Middle East production exposure and the divergence between marker prices and realized prices during periods of extreme volatility.
For refining operations, BP indicated that margin dislocations due to crude differentials, product yields, and freight costs could result in the difference between its refining indicator margin and realized margin exceeding $5 per barrel if current conditions persist, though this remains subject to market developments.
Strategic Initiatives & Leadership Transition
The quarter marked a significant leadership transition, with Meg O’Neill assuming the role of Chief Executive Officer. In her closing remarks, O’Neill outlined her vision for “a simpler, stronger, and more valuable company,” announcing plans to restructure BP with defined Upstream and Downstream segments aimed at resetting ways of working, ensuring accountability, simplifying decision-making, and empowering the organization.
O’Neill emphasized that “execution and consistency will be critical in realising our potential,” highlighting her immediate priorities of accelerating progress with tight focus on safety, operational performance, and capital discipline. With 30 years in the energy business, she expressed deep respect for BP’s history, global reach, and partnerships while acknowledging the complex operating environment characterized by geopolitical tension, supply disruption, rapid technological change, and shifting global energy demand.
The company announced the agreed sale of its Gelsenkirchen refinery in Germany during March, which will increase BP’s structural cost reduction target to $6.5-$7.5 billion by 2027, up from the previous target. This divestment is part of BP’s broader portfolio optimization strategy, which also includes the previously announced Castrol transaction expected to generate approximately $6 billion in proceeds.
BP outlined plans to reduce its hybrid corporate bond financing by approximately $4.3 billion by the end of 2027, from the current balance of $13.3 billion. The company plans to redeem €2.5 billion of perpetual hybrid bonds in the second quarter without replacement, as part of its commitment to strengthening the balance sheet.
Forward-Looking Statements
Looking ahead to the second quarter of 2026, BP provided guidance indicating several headwinds. Upstream production is expected to be lower due to seasonal maintenance, predominantly in the Gulf of America, and ongoing effects of Middle East disruption. The company also noted that heightened oil and gas price volatility could impact Production Sharing Agreement contracts.
The following table outlines BP’s detailed guidance for the second quarter across its business segments.
In the Customers segment, seasonally higher volumes are expected to be more than offset by a lower midstream result, including the potential reversal of first quarter timing effects. For Products, refining throughput is expected to be impacted by higher planned turnaround activity and lower throughput at the Whiting refinery due to a third-party event that has since been resolved.
For the full year 2026, BP maintained its capital expenditure guidance of $13.0-$13.5 billion and expects divestment and other proceeds of $9-$10 billion, including approximately $6 billion from the Castrol transaction, significantly weighted to the second half. The company reiterated its commitment to capital discipline and allocating excess cash to strengthen its balance sheet.
The comprehensive full-year outlook shows BP’s expectations across all major business segments and financial metrics.
Reported upstream production for the full year is expected to be lower due to Middle East disruptions, though underlying production for the Group, Oil production & operations, and Gas & low carbon energy segments are expected to be broadly flat. The company expects cash flow growth in Customers supported by structural cost reduction, partly offset by the earnings impact of completed and announced divestments.
BP expressed confidence in delivering its 2027 net debt target through continued strong operational performance, cash flow growth, proceeds from its divestment program, unwind of working capital, and allocation of all excess cash to the balance sheet. The company emphasized it is “building momentum, delivering on its financial plan, running assets well, high-grading its portfolio, and reducing its cost base” to achieve key targets by the end of 2027.
Full presentation:
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