BP (NYSE:BP) said third-quarter operational performance and a stronger commodity-price environment helped reduce net debt below its targeted range, while the company continued to reshape its portfolio and prioritize further balance-sheet improvement.
Chief Executive Officer Meg O’Neill said upstream production held at about 2.2 million barrels of oil equivalent per day, supported by improved plant reliability compared with the second quarter. Strong refining utilization and a higher contribution from trading also lifted results, she said, demonstrating the value of the company’s integrated upstream, refining and trading operations.
“Strong earnings and cash flow resulted in a significant reduction in our net debt, which is now below our targeted range,” O’Neill said. However, she added that BP’s financial obligations remain too high and that strengthening the balance sheet remains the company’s top priority.
Focus on Deepwater Horizon obligations
BP plans to direct excess cash flow toward fully addressing its remaining Deepwater Horizon liabilities. O’Neill pointed to a recently announced agreement with the state of Louisiana intended to accelerate the delivery of the company’s settlement commitments.
Chief Financial Officer Kate Thomson said the company sees an opportunity this year to address its remaining state and federal obligations in a way that creates value and improves BP’s financial resilience. She did not provide details on the mechanism for settling or accelerating the remaining payments, saying BP would update the market as plans are implemented.
Thomson noted that the company has faced more than $1 billion of Deepwater Horizon-related outflows in every second quarter for roughly the past decade. Eliminating those remaining obligations would improve BP’s breakeven and resilience, she said.
BP expects total financial obligations to fall to between $33 billion and $35 billion by year-end, according to discussion on the call. Thomson said the fourth quarter is expected to include lower production, lower refining throughput following the Gelsenkirchen exit, seasonally lower customer volumes, higher capital spending and about $800 million more in cash tax payments than in the third quarter.
Portfolio sales and capital discipline
BP said the closing of its Castrol transaction is imminent. The company also expects its sale of the Austrian mobility and convenience business to close this year. Divestment processes for Lightsource bp, BP’s U.K. North Sea business and Archaea remain underway.
O’Neill said the Lightsource bp process has been more challenging because it is a large and complex business, requiring a buyer capable of taking on the business in its entirety. BP is seeking to maximize shareholder value rather than pursue a rapid exit, she said.
By comparison, she described the U.K. North Sea sale process as well underway and competitive, with market interest and offers that she said were encouraging. The Archaea process is at an earlier stage.
The company completed the sale of its Gelsenkirchen refinery during the quarter and announced plans to market its North Sea and Archaea businesses. BP has also brought partners into exploration and production opportunities in Brazil, the Gulf of America and Iraq, while signing agreements in Venezuela to advance an offshore gas development.
O’Neill said BP will remain selective about bringing in partners for large upstream projects. In the Gulf of America, the company delayed a potential partner process for its Kaskida and Tiber Paleogene projects, citing a value-based decision. She said the balance-sheet position gives BP room to remain disciplined and seek fair value for interests in those assets.
Cost progress, impairments and trading
BP said structural cost reductions have reached the target range established in February 2025. Thomson said the company has delivered $4 billion of structural reductions since 2023, although the benefit has been offset by inflation, acquired cost bases and activity choices.
Inflation has added about $1.5 billion of costs, while acquisitions added roughly $800 million and activity choices added approximately $700 million, Thomson said. BP remains confident in its goal of an absolute cost base of around $18 billion in 2027, aided by the full-year effects of the Castrol and Gelsenkirchen exits.
The company also recorded a further $4 billion of impairments during the quarter, primarily related to transition businesses, Lightsource bp and offshore wind. O’Neill and Thomson said the impairments underscore the need for a more data-driven investment process and more rigorous testing of downside risks.
Trading was a significant contributor to third-quarter results. Thomson said BP’s trading businesses performed well across oil, gas, power and LNG, supported by integration with refining operations and customer supply commitments. She cautioned that the fourth quarter is typically a lower-volatility and lower-liquidity period, and BP does not provide forward guidance on trading.
Brazil, Iraq and December strategy update
In Brazil, BP reported oil shows at the shallower, post-salt target of its Tupinambá well and said drilling will continue toward a deeper pre-salt target. The company expects to move equipment to its Bumerangue discovery after completing work at Tupinambá, potentially by year-end.
BP plans flowback testing at Bumerangue to assess reservoir performance and may drill a second appraisal well depending on initial results. O’Neill said the company is evaluating both early-production options and a full-field development, but said it would be premature to commit to a concept-select date before appraisal data are available.
In Iraq, BP said it has established an operating entity for Kirkuk, has a rig in the country and has spudded its first well there. O’Neill said the company is pursuing production improvements through reservoir-management technology.
BP plans to provide a broader Strategy and Outlook Update on Dec. 15 in New York. O’Neill said the update will outline the company’s strategic direction, financial framework, metrics and targets, with an emphasis on building a business resilient to lower commodity prices.
She also rejected reports of board discussions about a possible breakup, saying BP’s board has reaffirmed the importance of the integrated oil-and-gas model. “The machine, in its totality, generates more value than the component parts would,” O’Neill said.
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.
