BP NYSE: BP reported third-quarter underlying replacement cost profit of $8.5 billion, up 48% from the second quarter, as stronger refining margins, gas marketing and trading results, and improved operating performance lifted earnings.
Chief Executive Officer Meg O’Neill said volatile energy markets and disrupted commodity trade flows underscored the benefits of the company’s integrated operations, which connect upstream production, refining, trading and customer supply. She said BP’s teams captured opportunities created by the market environment while maintaining production and refinery reliability.
“Some of the benefit is associated with the global macro environment, but importantly, improved operational performance allowed us to capture the opportunity,” O’Neill said.
Operations and financial performance
BP said upstream production averaged 2.2 million barrels of oil equivalent per day during the quarter, broadly unchanged from the second quarter. Upstream plant reliability improved to 95.3%, aided by recovery from second-quarter outages in the North Sea and Indonesia.
Refinery throughput was about 1.4 million barrels per day, lower sequentially following the disposal of the Gelsenkirchen refinery. However, refining availability improved to 96.5%, above BP’s 96% target. The company said utilization averaged 98% during the first nine months of 2026 and that higher reliability helped support nearly $2 billion of additional refining-margin capture during the quarter.
Group underlying replacement cost profit before interest and tax rose to $13.4 billion from $10.3 billion in the prior quarter. In gas and low-carbon energy, underlying operating profit increased by about $1.1 billion, driven by substantially higher gas marketing and trading results and higher realizations. Profit in customers and products increased by about $2 billion, with higher realized refining margins offsetting weaker fuels margins and lower results from Castrol and midstream operations.
Oil production and operations earnings were broadly flat, as lower liquids realizations were partly offset by lower exploration write-offs, Chief Financial Officer Kate Thomson said.
BP recorded net adverse adjusting items of approximately $5.4 billion, including $4 billion of post-tax impairments primarily related to transition businesses, including Lightsource bp and offshore wind. After inventory holding gains of about $1.6 billion, IFRS profit for the quarter was $4.7 billion.
Cash flow, debt reduction and shareholder returns
Operating cash flow totaled $14.8 billion, up $4 billion from the second quarter. Underlying cash generation was $15 billion, while quarterly outflows of $6.6 billion included $3 billion of capital expenditures, $1.3 billion of dividends paid and $2.6 billion of payments related to financial obligations and instruments, including $1 billion used to redeem hybrid securities.
Net debt fell by about $8.4 billion during the quarter to $13.9 billion. Broader financial obligations declined by $9.3 billion sequentially to $44.3 billion. O’Neill said BP had reduced financial obligations by around $16 billion since the first quarter, aided by strong cash generation and its decision to direct excess cash toward balance-sheet improvement.
The company declared a third-quarter dividend of $0.0866 per ordinary share. O’Neill said maintaining a committed dividend remains BP’s first call on cash flow, followed by disciplined investment and, when appropriate, share buybacks.
BP now expects financial obligations to decline to approximately $33 billion to $35 billion by the end of 2026. Thomson said the outlook is supported by current cash generation, divestment proceeds and an expected working-capital release of around $500 million during the remainder of the year, though the timing depends on commodity prices and broader market conditions.
Portfolio actions and Deepwater Horizon liabilities
Management said it is continuing to simplify BP’s portfolio and apply greater discipline to investment decisions. During the quarter, the company completed the Gelsenkirchen refinery disposal, launched sale processes for its U.K. North Sea and Archaea assets, and agreed to sell its Austria mobility and convenience business. O’Neill said the Castrol sale was expected to close imminently.
BP also agreed terms to bring partners into the Kirkuk project in Iraq, the Tupinambá project in Brazil and the Conifer project in the United States, and signed agreements to advance an offshore gas development in Venezuela.
O’Neill said BP recently reached an agreement with the state of Louisiana to accelerate delivery of the company’s Deepwater Horizon settlement commitments. The company intends to prioritize excess cash flow toward fully addressing its remaining Deepwater Horizon liabilities and is evaluating the best approach at both state and federal levels.
“Deepwater Horizon was a tragedy,” O’Neill said, noting that 11 men died and Gulf Coast communities and the environment were affected. She also acknowledged that BP has experienced an increase in tier-one and tier-two process safety events this year and said the company is taking actions to learn from each incident.
Outlook and December strategy update
For the fourth quarter, BP expects a significantly lower result in its customers business due to seasonally lower volumes, a lower midstream contribution and the anticipated completion of the Castrol divestment. The company said fuels margins and midstream performance remain sensitive to market conditions. It also expects income taxes paid to be about $800 million higher than in the third quarter, largely reflecting higher-profit installment payments.
For full-year 2026, BP raised its estimate for divestment and other proceeds to about $8 billion and updated its expected underlying effective tax rate to between 31% and 34%.
O’Neill said adjusted free cash flow was approximately $18 billion year to date, up 75% from the prior year, while return on average capital employed was around 18%. Structural cost reductions totaled $4 billion and were within the company’s target range, excluding additional reductions associated with the Castrol and Gelsenkirchen transactions.
BP plans to provide a broader strategy and outlook update in December, including its longer-term capital framework, operating targets and metrics for measuring performance.
About BP (NYSE:BP)
BP p.l.c. is a global integrated energy company headquartered in London, United Kingdom. Its operations span the exploration, development and production of oil and natural gas, as well as the processing, refining, transportation and marketing of energy products.
Through its businesses, BP supplies fuels for road transportation, aviation and marine use, along with lubricants marketed under the Castrol brand. The company also operates retail fuel and convenience locations and provides energy products and services to commercial and industrial customers.
BP has expanded its activities beyond traditional hydrocarbons to include lower-carbon businesses such as renewable power, bioenergy, electric-vehicle charging and hydrogen.
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