(WO) — bp CEO Meg O’Neill used the company’s second-quarter earnings release to outline a sweeping strategy aimed at improving operational performance, strengthening the balance sheet and reshaping the company’s upstream portfolio after acknowledging bp has fallen short of its own expectations.
bp CEO Meg O’Neill. Image: bp.
“This is my first full quarter at bp,” O’Neill said. “I’ve seen enough to know this company can be extraordinary.”
At the same time, she delivered an unusually candid assessment of bp’s recent performance.
“We have not delivered consistently; we have written off too much value; and our costs and liabilities are not resilient enough in a low price environment,” O’Neill said. “We have to get fit to grow.”
O’Neill identified five priorities for the company: strengthening the balance sheet, simplifying the portfolio, investing with greater capital discipline, improving operational performance and embedding greater accountability across the organization.
Those priorities are already reshaping bp’s portfolio. In recent weeks, the company announced plans to market its UK North Sea business, agreed to sell its Austrian retail business, completed the sale of its Gelsenkirchen refinery, announced plans to divest Archaea Energy in the United States and reached an agreement to bring partners into the Kirkuk redevelopment project in Iraq.
O’Neill also pointed to bp’s decision to exit the Bay du Nord project offshore Canada as an example of the company’s renewed capital discipline.
“We need to compete in the weight class we are in,” she said. “Every dollar of capital competes.”
Despite reporting stronger second-quarter financial results, O’Neill acknowledged that operational performance declined during the quarter. Upstream plant reliability fell to 92.4% from 95.7% in the first quarter, while production declined to 2.2 MMboed from 2.3 MMboed, reflecting planned maintenance and disruptions related to the conflict in the Middle East.
Financially, bp reported underlying replacement cost profit of $5.7 billion, up from $3.2 billion in the first quarter, while operating cash flow increased to $10.9 billion. The company also reduced the combined total of net debt, hybrid bonds, leases and Gulf of America settlement liabilities by $6.9 billion during the quarter.
O’Neill said bp will now focus on execution as it works to improve returns and simplify the business.
“We know what we need to do, we are taking urgent action,” she said. “Focus, perform, grow.”
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