BP's chief executive Meg O'Neill said the North Sea is no longer competitive for the company, as the oil major reported that its quarterly profits more than doubled on the back of volatile oil prices.
Speaking to CNBC, O'Neill said the North Sea has been very important to BP for more than 50 years, calling it a great basin with high-quality oil and gas resources. But she said that when BP looks at how it fits into its portfolio today, it just doesn't compete for capital.
BP announced its intention to sell its North Sea operations last week, with O'Neill saying the business would be better positioned as part of another company. In her first Budget in 2024, Chancellor Rachel Reeves increased the windfall tax on North Sea oil and gas producers to 38 per cent from 35 per cent and extended the levy by one year. Combined with the Ring Fence corporation tax of 30 per cent and a supplementary charge of 10 per cent, that brings the headline tax rate on North Sea producers to 78 per cent.
BP's underlying replacement cost profit, its preferred measure, jumped by around 78 per cent to $5.7 billion (£4.2 billion) for the second quarter, its strongest quarterly profit in four years. Higher oil prices helped boost its refining and trading businesses.
BP sells off more assets
The FTSE 100-listed firm also said it would sell its US biogas business, Archaea, a leading provider of renewable natural gas which it bought for $4.1 billion in 2022, as part of its streamlining efforts.
O'Neill, who joined BP in April, said the company was not making the most of its potential, with areas where performance fell short. She pointed to a decline in production, a sharp fall in upstream reliability and BP's refineries processing less crude.
She said this was due in part to planned maintenance and the conflict in the Middle East, but added that it was a reminder that BP has more to do to deliver consistent operational performance.
Production pressure into third quarter
Upstream production will remain under pressure in the third quarter, BP said, while full-year reported production is expected to be lower than in 2025.
O'Neill said the company's performance over the past few years had not met its own expectations, let alone those of its shareholders. She said BP had not delivered consistently, had written off too much value, and that its costs and liabilities were not resilient enough in a low price environment.
She promised urgent action to progress the business, including plans to strengthen the balance sheet and invest with greater discipline. She also recommitted to simplifying BP's portfolio as it continues its pivot back towards fossil fuels after a foray into renewable energy. Since O'Neill's appointment, BP has been reorganised into two segments, upstream and downstream.
In recent weeks, BP has sold its Gelsenkirchen refinery in Germany, agreed to sell its Austrian retail business and announced its intention to sell its North Sea operation. O'Neill said BP knows what it needs to do, is taking urgent action, and is confident this is how it will grow long-term value for shareholders.
Shares rise as analysts react
Shares in BP rose 0.72 per cent to 556.1p, bringing year-to-date gains to 27 per cent.
Duncan Ferris, an analyst at Freetrade, said that from a shareholder perspective, BP's willingness to be ruthless as it trims underperforming assets shows the business is not merely twiddling its thumbs while the market remains supportive. He said that assuming disposals achieve sensible prices, the portfolio trim should support further balance sheet improvements after net debt fell by more than $3 billion during the quarter, and that the 4 per cent dividend increase provides shareholders with a further sign the balance sheet is moving in the right direction. He added that the question moving forward is whether a new-look simpler BP will be a more reliable BP.
Earlier the same morning, Saudi Aramco, the world's largest oil company by production, reported adjusted net income of $33.4 billion for the second quarter, up 33 per cent year-on-year.
