BP PLC's (LSE:BP.) bumper second-quarter profit has given new chief executive Meg O'Neill an early opportunity to accelerate debt reduction, analysts said after Tuesday's results, although ongoing issues and criticism from Donald Trump and UK political groups underline that the road ahead for the shares will be far from smooth.
Underlying replacement cost profit more than doubled year on year to $5.7 billion, the highest since 2022 and 12% ahead of the City consensus. Cash flow before working capital movements reached $11.9 billion, beating forecasts by 32%.
Net debt fell from $25.3 billion to $22.3 billion and BP said it now expects to reach its $14 billion to $18 billion target by the end of 2026 – one year earlier than planned – while repaying another $1 billion of hybrid securities this quarter.
Jefferies analyst Mark Wilson called it a "strong start" for O'Neill, who used her first full-quarter results to outline five priorities covering the balance sheet, portfolio, investment discipline, operations and accountability.
It was a "strong statement" from O'Neill too, he said, with the CEO criticising BP for having "not delivered consistently" and having "written off too much value". The planned sale of US biogas business Archaea, following the decision to market its North Sea operations, shows how quickly she is reshaping the portfolio.
But there are complications. BP raised its 2026 capital spending forecast by $500 million to $13.5-14 billion, while reducing expected disposal proceeds by $1 billion to $8-9 billion. Plant reliability also fell to 92.4% from 95.7%, leaving operational improvement as a clear priority.
Political risk
The profit surge, driven largely by the Middle East energy shock, also brings political risk, with US President Donald Trump criticising oil companies for "making too much money" from high energy prices caused by his war on Iran.
After US super-majors ExxonMobil and Chevron revealed super-normal profits last week, Trump said the companies would "give some of that back to the public". He added that: "They’re making too much money based on a shortage. I don’t like it."
UK campaign group Global Witness today called BP's earnings a "scandalous reminder" of how oil companies had benefited while energy costs rose.
Kathleen Brooks at XTB said BP could face accusations of profiting from the cost-of-living crisis, despite the industry's windfall taxes.
O’Neil addressed this issue in her quotes alongside the results, arguing that in "one of the most disrupted periods" for the market BP "stepped up, working tirelessly to keep energy flowing for our customers", focussing on boosting supply of critical fuels like diesel and jet fuel to alleviate pressures.
Brooks said: "There are already massive windfall taxes on oil and gas companies, and BP reported that its effective global tax rate is 33-37% for Q2. It also paid $1.2bn in UK tax last year and it is likely to pay significantly more this year due to rising revenues.
"This is unlikely to placate Big Oil’s critics," Brooks acknowledged, adding that Trump's comments "could mean that investors need to factor in trickier political waters for oil majors in the lead-up to the UK Budget and the Midterms this autumn, which could stymie their share price gains".
With BP shares already up 27% this year and oil prices easing in the third quarter, she warned much of the good news may already be priced in and that this could be the high point for the shares.
