BP - Earnings Call - Q2 2025 (Q&A)

Transcript

Craig Marshall (SVP & Head - IR)

Today's video presentation features Murray Auchincloss, Chief Executive Officer and Kate Thompson, Chief Financial Officer. Before I hand over to Murray, let me draw your attention to our cautionary statement. In this presentation, we will make forward looking statements that refer to our estimates, plans and expectations. Actual results and outcomes could differ materially due to factors we note on this slide and in our UK and SEC filings. Please refer to our annual report, stock exchange announcement, and SEC filings for more details.

These documents are available on our website. Over to you, Murray.

Murray Auchincloss (CEO & Director)

Thanks, Craig. Before we begin, and following the announcement a fortnight ago, I'd like to extend my welcome to the incoming chair, Albert Manifold. Albert will join the board on the September 1 as a nonexecutive director and chair elect before taking over as chair on the October 1. I am really looking forward to working with him. Turning to today's presentation.

We are now two quarters into our twelve quarter plan, and I'm encouraged by our results. Our operations are performing well with continuing strong plant reliability in the upstream and the best first half refining availability since 02/2006. We continue to invest to enhance our portfolio and have also made further progress on our divestment program, with expected proceeds from completed or signed agreements now close to $3,000,000,000 We have also made good progress on delivering our program to safely and sustainably reduce our costs as we grow the company. We have now delivered around $1,700,000,000 of structural cost reductions since the start of the program, with around three quarters from supply chain efficiencies and organizational transformation. We remain focused on driving reductions down to the bottom line, and Kate will provide more details on this shortly.

And today, we have announced an increase to our resilient dividend for the second quarter and a further share buyback program for the third quarter. All of this is in service of delivering a compelling investor proposition and to sustainably grow long term shareholder value. I'm pleased with progress, but of course, there is a lot more to do. We remain relentless in our aim to deliver improvements right across BP. Turning to performance highlights year to date and for the quarter.

We remain focused on safety, which is our number one priority. Process safety events have decreased by around 30% compared to the first six months last year. To date, upstream production is ahead of plan, increasing by around 3% quarter on quarter and averaging 2,300,000 barrels a day for the first half of the year. Upstream plant reliability and refining availability both above 96%. Focusing on the second quarter, the strong operational performance supported the delivery of $2,400,000,000 of underlying net income and $6,300,000,000 of operating cash flow, which included a $1,400,000,000 build in working capital.

Consistent with our financial frame, we have announced a dividend per ordinary share of 8.32¢, a 4% increase, and a further $750,000,000 share buyback for the second quarter. I'm also proud of the progress the team is making in executing our strategy, as can be seen in the progress we have made since the first quarter as we grow the upstream. Following the safe delivery of first oil at Argo Southwest extension in the Gulf Of America and first gas at Mento in Trinidad, we have now delivered five of the 10 major project start ups planned through 2027. Additionally, the Azul joint venture announced the successful startup of the Agogo integrated West Hub project in Angola, the first of a further seven projects planned for startup through 2027 across our joint ventures in Norway, Angola and Argentina. In The US, BPX Energy started up Crossroads, the fourth and final central delivery facility in the Permian Basin, increasing takeaway capacity in the liquids rich basin as we continue to grow production out to the end of the decade.

We've taken four final investment decisions this year, including Shah Deniz compression project in Azerbaijan, the next major phase of development of the giant Shah Deniz gas field, Atlantis major facility expansion project in the Gulf Of America, and an infill wells program at the KGD 6 block in India. And we've continued to deepen our hopper. In Azerbaijan, together with our partners, we entered into a series of agreements that will build and expand on our major oil and gas interests. In Libya, we signed an MOU with a national oil corporation to evaluate redevelopment opportunities in the Surt Basin. And finally, our subsurface and drilling teams have continued their strong start to the year with 10 exploration discoveries so far.

Our best year in recent memory, including an exciting well in the Bumarengue Block located in Brazil's Santos Basin in which we hold 100% participation. The discovery is about 400 kilometers from Rio De Janeiro, in water depths of 2,400 meters. The well was drilled to a total depth of 5,850 meters, intersecting the reservoir about 500 meters below the crest of structure and penetrating an estimated 500 metre gross hydrocarbon column in a high quality, pre salt carbonate reservoir with an areal extent of greater than 300 square kilometres. Rig site analysis indicates elevated levels We'll now begin laboratory analysis to further characterize the reservoir and fluids discovered, followed by appraisal activities subject to regulatory approval.

These five major project start ups, four major project FIDs, 10 exploration discoveries, and significant new access deals delivered so far in 2025 all underpins our confidence in the continued growth of the upstream. In downstream, the team is focused on driving improved competitiveness and reliability across our facilities. Refining availability was 3% higher in the first half of the year compared to the same period last year. Importantly, we completed two significant refinery turnarounds in the quarter, including a major crude and coker turnaround at Cherry Point. Earnings in our customers' business were around 50% higher in the first half of the year compared to the same period last year, supported by strong integrated performance across fuels and midstream and delivery against our structural cost program.

And we are addressing areas where results are not what we expect. For example, in travel centers, we are executing a program to protect near term cash flow and improve profitability at the bottom of cycle. In The U. S, we are working to optimize further the fuel's value chain. Meanwhile, we're reshaping our portfolio to focus on businesses and markets where we have advantaged and integrated positions.

We are progressing the strategic review of Castrol at pace. The business continues to perform very well, with earnings more than 20% higher in the first half of the year compared with the 2024, and the second quarter marking the eighth consecutive quarter of improved year on year performance. Last month, we agreed to sell our mobility, convenience and BP pulse businesses in The Netherlands, and the sale processes for our Austrian retail business and Gelsenkirchen refinery continue. In transition, we're continuing to high grade and decapitalize low carbon energy. This includes agreeing the sale of our US onshore wind business following a competitive bidding process.

In offshore wind, we have completed the formation of the GeronX BP, our fiftyfifty joint venture. Finally, our decisions to exit projects in The US and Australia demonstrates the further focusing of our hydrogen and CCS portfolio. In summary, strong operational performance this quarter and good strategic progress. Our focus is on maintaining this momentum as we look ahead to the 2025 and beyond. With that, I'll hand over to Kate to talk through our second quarter financial results.

Kate Thomson (CFO & Director)

Thank you, Murray, and hello, everyone. I'll start with the segment financial performance. In the second quarter, the gas and low carbon energy underlying financial result was $500,000,000 higher than the previous quarter, reflecting an average gas marketing and trading result compared with a weak result in the first quarter and higher production volume, partly offset by lower realizations and a higher DD and A charge. In oil production and operations, the underlying result was $600,000,000 lower compared to the previous quarter, reflecting lower realizations and a higher DD and A charge, partly offset by higher production. In customers and products, the underlying result was around $900,000,000 higher than the previous quarter.

Looking at the businesses, in customers, the underlying profit was around $400,000,000 higher than the previous quarter, reflecting seasonally higher volumes and stronger fuels margins. This was the best 2Q for over a decade as we continue to build momentum across the business. In product, the underlying profit was around $500,000,000 higher than the previous quarter, reflecting stronger realized refining margins and a strong oil trading contribution, partially offset by a significantly higher level of turnaround activity.

Murray Auchincloss (CEO & Director)

Just what it

Kate Thomson (CFO & Director)

I do want to recognize the trading organization for its performance this quarter during what was a period of challenging trading conditions.

Speaker 3

Seen in the past.

Kate Thomson (CFO & Director)

This is a demonstration of the organization's resilience and their continuing focus on creating value and delivering returns through the cycle. Below the operating segments, underlying finance costs were $1,100,000,000, and noncontrolling interest was 300,000,000 similar to the prior quarter and expected to remain at this level for the next couple of quarters. The underlying effective tax rate decreased in the second quarter to 36%, reflecting changes in the geographical mix

Murray Auchincloss (CEO & Director)

of profits. For the first

Kate Thomson (CFO & Director)

half, our underlying tax rate was 43%, and we continue to expect the full year underlying effective tax rate to be around 40%. Taken together, we reported group underlying replacement cost profit of $2,400,000,000. Net adverse adjusting items was 300,000,000, and inventory holding losses after tax was $400,000,000. On an IFRS basis, our headline profit was $1,600,000,000 Now turning to cash flow and the balance sheet. Operating cash flow was $6,300,000,000 including a working capital build of $1,400,000,000 Operating cash flow was $3,400,000,000 higher than the previous quarter, reflecting higher earnings and a lower working capital build. We did see some of the first quarter working capital build reverse in the second quarter, but this was more than offset by the scheduled $1,100,000,000 Gulf Of America settlement payment and other movements. Capital expenditure was $3,400,000,000 bringing the first half CapEx to around $7,000,000,000. Divestment proceeds received in the quarter were around $1,400,000,000, bringing the first half to around 1,700,000,000.0. As

Murray said, expected proceeds from completed or signed agreements are now close to $3,000,000,000, underpinning our continued confidence in delivering expected divestment proceeds for 2025 in the range of 3 to $4,000,000,000. Elevated levels of

Together, our second quarter cash inflows driven by higher operating cash flow, the divestment and other proceeds exceeded our cash outflows resulting in a reduction in net debt to $26,000,000,000. Turning to our financial frame, which remains unchanged. We remain committed to our net debt target of $14,000,000,000 to $18,000,000,000 On shareholder distributions, firstly, our policy is to maintain a resilient dividend. For the second quarter, we have announced a dividend of 8.32¢ per ordinary share, an increase of 4%. Secondly, we are committed to sharing excess cash through buybacks over time.

This policy enables us to share the upside in cash generation when the price environment is stronger while enabling the balance sheet to remain resilient in a lower price environment. And today, we announced $750,000,000 of share buybacks to be executed by the 3Q results. Our guidance remains for total dividends and share buybacks to be in the range of 30% to 40% of operating cash flow over time. Looking ahead, we continue to expect to announce buyback decisions at the time of quarterly results. The Board will, of course, be mindful of both short term macro volatility and the medium term outlook for prices across the basket of commodities that drive our cash flow.

I'd now like to spend the next few minutes highlighting the progress we've made on two of our primary targets. Firstly, on our target to deliver 20% compound annual growth and adjusted free cash flow from 2024 to 2027. We're six months into our reset strategy and making good progress, delivering around 40% growth year on year on a price adjusted basis, supported by interventions we've taken on CapEx and the benefit of lower cash taxes. As we continue to drive improvement in performance, we remain confident in delivering the underlying organic growth from across the businesses. Secondly, we're committed to delivering 4,000,000,000 to $5,000,000,000 of structural cost reductions against our 2023 baseline by the '27 and to updating you on our progress every six months.

Delivering sustainable cost reductions safely is an important factor underpinning our adjusted free cash flow target. This is an area of relentless focus for us as a leadership team. Profitability Before looking at progress, let me remind you how we frame our 4 to $5,000,000,000 target, which represents around 20% of our 2023 underlying operating expenditures of $22,600,000,000. As a reminder, underlying operating expenditures are reported across two income statement lines: production and manufacturing expenses, or P and M, and distribution and administration expenses, or D and A. Starting with our fourth quarter twenty twenty four results, we introduced additional disclosures in our results announcements, which further break out the P and M and D and A costs into those that vary primarily by volume versus those that are in our underlying cost base.

We believe the additional disclosures frame our underlying operating expenditure and structural cost reductions consistently with peers and improve comparability. And as a reminder, potential reductions that would be associated with the outcome of the Castrol strategic review and Gelsenkirchen transaction are not included in this target. And we have made strong progress in delivering these cost reductions since we started this program. In 2024, we delivered around $750,000,000 of structural cost reductions. In the 2025, we've continued to build positive momentum, delivering an additional $900,000,000 in savings.

That means since the start of our program, we have now delivered around $1,700,000,000 of structural cost reductions, more than offsetting over $1,200,000,000 of costs related to the growth of our business and environmental factors. This results in a reduction in absolute underlying operating expenditure of around $500,000,000 Now looking at the 2025 in more detail, around 50% of growth costs were organic. These relate to growing the Upstream, with major project startups such as Mento and growth in BPX Energy production, driving higher underlying operating expenditures. The other 50% of growth is inorganic related to the full consolidation of Lightsource BP and BP Bioenergy, which means our underlying operating expenditures reflect removing costs associated with divestments and cost growth acquisitions. We've no other material and organic additions in the plan.

Our underlying operating expenditures are also influenced by environmental factors and notably inflation of around $300,000,000 We continue to work to offset much of this through our procurement organization, including working closely with supplier alliances. Looking forward, we expect continued momentum in the pace of delivery into the 2025. Progress in our structural cost reduction program reflects the significant changes we've made to the performance culture across the organization to further embed discipline and accountability. You can see on this slide the contribution from each of the business groups with around 60% coming from the C and P segment since the start of 2024. We've also been heavily focused on reducing our corporate and overhead costs, and we've delivered over $400,000,000 of reductions from these activities. The benefit of this shows up in the business group numbers, with the remaining $100,000,000 in other businesses and corporate. Looking at the reductions by lever across the supply chain, we've delivered around $900,000,000 of savings.

Over a third of our supply chain spend reductions seem so far reflect a reduction in contractors, significantly enabled by technology, which I'll elaborate on in a minute. We have already reduced our contractor numbers by 3,200, and we expect a further 1,200 contractors to exit by the 2025. Beyond that, we will continue to rigorously review the remaining contractor activity across our businesses and functions. In organizational transformation, we now expect 6,200 BP roles to be impacted by the 2025 out of an office based workforce of 40,000 employees. With a majority of the exits anticipated in the 2025, we expect material incremental savings from the 2026.

And as Murray mentioned, we're in action high grading our portfolio. More than 50% of portfolio related reductions to 2027 are now underpinned by announced divestments. Before I close with guidance, I just want to showcase how technology is helping to improve capital productivity and drive cost reductions right across the portfolio. Our total resource management programme leverages an advanced analytics tool developed in collaboration with Palantir to systematically manage the contractor landscape across BP. This initiative has enabled us to achieve significant supply chain spend reductions, as I've previously mentioned.

In organizational transformation, we're reducing the number of ERP systems that we use by 85%, democratizing data to allow work to be executed in lower cost locations and implementing AI powered systems. Within the businesses at our offshore oil and gas facilities, digital tools enable us to optimize production through real time surveillance and equipment monitoring, increasing overall BP operated production by around 5%, in addition to protecting over 10% more from going offline. Planning a well is complex and can take months. In Azerbaijan, the engineers are now using generative AI to run thousands of scenarios in just a few days, helping to deliver a 90% reduction in the time required for well planning. In conjunction with Palantir, we're now taking the learning from a decade of digitizing the upstream across to our refining business, where we see multiple opportunities to remove costs, create efficiencies, and optimize our refinery portfolio.

And in convenience and mobility, we're utilizing AI and digital tools to drive efficiency in our marketing organization. For example, we're now producing point of sale marketing materials in around 50% of the time it used to take, thereby allowing greater speed to market and significantly reducing costs. Now turning to guidance and looking ahead to the third quarter, we expect upstream production to be slightly lower compared to the second quarter. And customers seasonally higher volumes compared to the second quarter and fuel margins to remain sensitive to movements in the cost of supply. And in products, a significantly lower level of planned refinery turnaround activity, which is partly offset by seasonal effects of environmental compliance costs.

In terms of cash flow, we expect cash taxes paid to be around a billion dollars higher than the second quarter due to the timing of installment payments. And we have elected to redeem $1,200,000,000 of hybrid bonds in September. This represents the remaining amount callable in the June 2025 window, and this was pre financed in November 2024. Regarding the full year 2025 guidance, in addition to the change in customers, I have a few things to highlight. In products, we're now no longer providing guidance on refining margins because we're now giving you a weekly refining indicator margin, which I will give you more detail on shortly.

The OB and C underlying quarterly charge is now expected to be in the range of 500,000,000.0 to $1,000,000,000 subject to foreign exchange impacts. We now expect the depreciation, depletion and amortization to be slightly higher than 2024. We continue to expect divestment and other proceeds to be around 3,000,000,000 to $4,000,000,000 with the remaining proceeds weighted towards the 2025.

Speaker 3

Recognize this number. Is that sort of

Kate Thomson (CFO & Director)

Before I hand back to Murray and consistent with our continuing effort to improve guidance and enhance transparency. Effective today, we are introducing a new BP refining indicator margin. This metric is more representative of BP's refining portfolio and realized refining margin per barrel. We believe this weekly disclosure enhances external understanding of our realized margin delivery and refining profitability. To support this, we've also updated our refining rule of thumb.

Speaker 3

There was a number

Kate Thomson (CFO & Director)

As a consequence of this change, the BP refining market margin is retired.

Speaker 3

BOE of oil in place.

Kate Thomson (CFO & Director)

The price assumptions applicable to two of our primary targets have been rebased with the refining indicator margin. And importantly, there is no change to our targets. More details can be found in the appendix to this presentation and in our supplementary disclosures. Now let me hand back to Murray.

Murray Auchincloss (CEO & Director)

Thanks, Kate. To summarize, in the 2025, we have delivered strong operational performance with greater than 96% reliability, made further progress on delivering structural cost reductions, enhanced our portfolio, notably in the Upstream, and progressed our divestment program, and announced a second quarter dividend increase of 4% per ordinary share, payable in the third quarter and a second quarter share buyback of $750,000,000 to be executed by the time of our third quarter results. We are two quarters into a twelve quarter plan and are laser focused on delivery of our four key targets. And while we should be encouraged by our early progress, we know there's much more to do. In advance of Albert joining the board on the September 1, he and I have been in discussions and have agreed that we will conduct a thorough review of our portfolio of business to ensure we are maximizing shareholder value meaningful, allocating capital effectively. We are also initiating further cost review, and while we will not compromise on safety, we are doing this with a view to being best in class in the industry.

We reaffirm our commitment to ensure that there is an embedded process of continuous business improvement across our operations. This is all in service of accelerating the delivery of our strategy. BP can and will do better for its investors. Thank you for listening.

Speaker 4

Different geographies. Second, And I just wanted to ask you about trading. Performance seemed good in the second quarter versus wider industry comps. What's your outlook from here regarding the broader conditions for trading optimization when you look through to the sort of second half of the year? And if you were to continue to see, let's say, a sort of a moderated base line as we've seen at times in the first half of the year, is Q2 seen within the company as a good approximate baseline? Super.

Murray Auchincloss (CEO & Director)

I'll take trading. Kate, if you want to talk about best in class, please. Look. I think on trading, first, an average quarter for the gas business and a strong quarter for the oil trading business. As we look out to conditions moving forward, I think the things I'd say on the oil RPT side is that inventories from a physical basis are quite tight.

So there's likely to be a fair bit of a fair bit of volatility in the event that there are outages occurring. That's probably true through the third quarter and into the start of the fourth quarter. In the fourth quarter on the oil side, we see more production coming online from outside of OPEC, and trading conditions will highly depend upon what OPEC plus does, what happens with sanctions on Russia, what happens with sanctions on Iran. So I would I would expect continuing volatility in that space on diesel and gasoline. We we move into a heavy tar season in October as well.

So that should provide conditions for volatility. I think on the gas side, from our perspective, we trade optionality. That's how we've designed the gas books. So we don't necessarily try to link to a particular index. We don't try to do point to point sales.

Instead, we look for opportunities to arbitrage between price differences on the spot or across time. And it feels in a market where natural gas becomes oversupplied as you move into late twenty six, twenty seven that we're well positioned to be able to arbitrage between these things. I think what you should expect moving forward is as we've guided in the past, which is 4% to returns of the corporation from trading. Assume it's half oil, assume it's half gas, and assume it's ratable across each quarter. It won't be right in any one quarter, but it durably is what we have done over the past four and a half years.

So thank you for that question. Matt, over to you, Kate, on the cost and best in class.

Kate Thomson (CFO & Director)

Yeah. Yeah. Hi, Matt. I'll maybe start with the areas of the group that are slightly easier to benchmark and understand than I would put into that category, the sort of central functions like finance, like, people people and culture, like technology. Think we've got a pretty good sense of where we probably stack up against our peer group with regard to that.

Customers is similar. I think it's fairly straightforward to benchmark. As we as we step through the refining and the upstream part of the portfolio, that is where it is it gets more complicated. With refining, we have been using the Solomon benchmarking very regularly. And as I said, we're waiting for the updated benchmarks to come in over the summer to get a sense of where we stack up across our refining portfolio versus our peer group.

And with the Upstream, we we go basin by basin because to your point, you need to understand the construct of the businesses inside your basin. You can't just look at the the, unit production cost and and and that that takes into consideration various component parts, whether it's PSAs or tax and royalties. It's it's going down to a basin level so that you can understand within that basin how you're tracking against your peer group. So that's the piece of work that we're going to get into at pace as we get these these data points in over the summer. And as we get a sense of where there are gaps versus what we consider to be best in class, we'll we'll update you as we go.

And I guess the only other thing I would say that is worth remembering is we've been pretty explicit that the 4 to $5,000,000,000 of structural cost reductions doesn't take into consider any into consideration any transactions with regard to Castrol and Gells and Kirk. And so as and when we reach a conclusion on those two transactions, we'll update the market on those two elements and how that would impact the GBP 4 to 5,000,000,000 cost target as well.

Murray Auchincloss (CEO & Director)

Great. Thank you, Kate.

Craig Marshall (SVP & Head - IR)

Thanks, Kate. Thank you, Matt. We'll come back to Teams and I'll let it do my hard work. We'll start with the first hand up, which is Josh Stone. Josh at UBS, please.

Joshua Stone (Head - European Energy & Equity Research)

Yeah. Thanks, and good afternoon. Two questions, please. If I could follow-up on trading, you clearly have very good performance of oil trading this quarter, goes against some of the trends we've seen elsewhere in the market. You made some comments in the press around shortening the duration of trades.

So I was hoping if you could just elaborate on this and speak to if there's any other drivers that are are resulting in this this sort of relative strength you're seeing versus some others, whether that's maybe access to data or appetite to take on risk or any comments there would be helpful. And then secondly, on impairments, there were another lump of impairments this quarter, about $1,200,000,000 You've given us the divisions, are you able to elaborate on which assets are actually driving these impairments? Thanks.

Murray Auchincloss (CEO & Director)

Great. Thanks, Josh. I think on trading, without giving away commercial advantage, I'd just say on the oil trading side, they shorten the duration. Normally, you trade three, six, nine months in duration for time spreads, etcetera. But there's a lot of path risk around that when there's macro volatility and headline volatility.

So you move to shorter duration trades to manage that risk and that's what the teams were doing through April and May. I think I'll stop there for fear of giving up any commercial advantage beyond that and pass over to Kate on the question on impairments.

Kate Thomson (CFO & Director)

Yes. Hi, Josh. Thanks for the question. Yes, we have taken a number of impairments across the businesses this quarter. And I think the first thing I'd say is that we're never happy to impair assets.

It was Capital One, so we're very cognizant of that, which is why Murray and I are driving so hard on improving and increasing our capital productivity in every part of the business. Maybe a couple to call out, which may may be helpful, in the customer and products space. We, we we impair assets where we are working through a sales process. There's an accounting approach that we have to take based on the value that we expect to see, versus the value at which we hold those assets. And we took decisions, as Murray referenced a little bit earlier on the call, with regard to hydrogen and biofuels down in Australia, and as a consequence, we've taken an impairment on that.

That's all about quality of choice and making the right decisions for us as a company moving forward as we execute on our strategy. And maybe the only other one that's probably worth highlighting is in the gas and low carbon space where we've taken a further impairment with regard to M and S. We're now lifting cargoes into our trading organization from that business, and that's where we see significant future value coming. We've now loaded finished loading our our seventh cargo so far this year as as it continues to ramp up. So M and S is performing well now.

It's it's started up, and it's ramping up. And that's probably as much as it's worth sharing with you, Ruth, regard to impairments, but it it remains an area of focus for us. Josh, please be clear on that.

Murray Auchincloss (CEO & Director)

Thanks, Kate. Craig?

Craig Marshall (SVP & Head - IR)

Thank you, Josh. I am gonna just jump quickly to the web. We've got a question from, I I think Alejandro Vigil at Santander. Alejandro, you've got three questions. I think two of them have been covered, but I'll take, maybe the last question, read it out.

Probably one for you, Kate. What expectations of net debt by the end of the year? And that's from Alejandro.

Kate Thomson (CFO & Director)

Yeah. Thank you, Alejandro. Fair question. Net debt was down $1,000,000,000 this quarter, versus 1Q, which is good to see. Quite a lot of moving parts.

You can see there's been a pretty sizable working capital build through the first half. We end the first half at total working capital build of $4,700,000,000 If you think back to '1, excuse me, 1Q, we had 3,400,000,000.0 of working capital build, and I said the majority of that we should expect to reverse through the remainder of the year. We saw about 600,000,000 of that reverse in 2Q, but it was more than offset by other moving parts. You'll recall the Deepwater Horizon payment we make every every two q. There's also in the first half been payments, with regard to assets held for sale.

If they were not held for sale, they'd be accounted for as capital. We are forced to account for them as working capital because of accounting rules. And there's been about 200,000,000 of decommissioning payments as well in the first in the first half. So as I look at all of that, the reason I'm I'm stepping you through that is I think there's about, $2,000,000,000 of permanent working capital bill to date, with regard to the group. As I look forward, my best estimate of the level of reversal still to come through the third and fourth quarter is between 1,500,000,000.0 and $2,000,000,000 Other moving parts that we've been clear around is the 1,200,000,000.0 of redemption of hybrid, that we will that we will redeem in in March.

And and then you've got, of course, operational performance and price, which will move around. So I would say if you were seeing flat price, all these other moving parts and the level of working capital unwind I've just stepped through, my expectation is we should see net debt continue to slightly trend down towards the back end of the year. I hope that's helpful.

Craig Marshall (SVP & Head - IR)

Thank you, Kate. Okay. Back to Teams and we'll take the next question from Ryan Todd at Piper Sandler. Ryan?

Ryan Todd (MD & Senior Research Analyst)

Good. Thanks. Maybe on, one more on exploration. I mean, congratulations on the great results year to date, 10 discoveries. Maybe you can talk about has the approach has your approach to exploration changed at all, or is it just increased allocation of resources?

Good luck. And outside of Brazil, what have you seen that excites you the most? And then maybe a second question on much better refining performance this quarter operationally and in terms of margins. Can you maybe talk through what's gone well and how you think about the refining environment into the back half of this year and into 2026?

Murray Auchincloss (CEO & Director)

Great. Let's see. I think on refining environment, I'll take that refining performance over to Gordon, and then you guys transition on exploration and technology. Gordon and Emma could trade that off. So on refining environment, Ryan, I think relatively tight is what I'd say right now.

Diesel margins, gasoline margins, jet sorry. Diesel gasoline jet stocks are quite low relative to history. As well, all of the additions we've seen on in Das Bocas and Dangote have now been offset by refinery closures around the world from the announcements you saw at Prax, the California refinery shutting down, and other ones that have shut down. So instead of adding capacity to the non Chinese refining fleet, we're basically flat while overall demand for energy continues to grow at 1%. So fairly tight is our sense.

We expect to build as we move through the driving season as all the refineries are working, and then we expect it to become quite tight again as we move into tar season. I think the I I think I would say that extends into '26 as well, where if we do see the increasing demand we see for product and we're not getting refinery expansions that we expect it to be tight as we work our way through the back into the early days of '26. I won't I won't really forecast anything beyond the early days of '26. So I think that would be the structure of the refining markets as we see it today. Gordon, over to you on refining performance.

Gordon Birrell (EVP - Production & Operations)

Yes. Thank you for the question, Ryan. I'm very pleased with refining availability. We've just delivered the quarter at 96.4% availability, which is the best quarter we've had, since 02/2006. We've just delivered the first half of the year at 96.3%, which is the best first half since we started recording on this metric.

So the refineries are actually running really well right now. And what's gone well, I think the vulnerability management was taking a process that we've run-in the Upstream for many years and implementing it's not finished implementing it in refining. So we manage our vulnerabilities, which basically means we intervene before a piece of kit falls over before it trips to prevent it tripping, keeps it online longer. We've got centralized maintenance, centralized towers where common process is being deployed. So and of course, we're starting the process of digitization in refinery.

All that adds up to a more systematic and controlled refining portfolio, which shows up as better availability. If I could transition, Ryan, into exploration, the success, I think a couple of things I would highlight. One, we're data led, so it's not it's not just luck. And working with team, the the the quality of seismic and the lighting up of the subsurface on seismic images we get now is quite remarkable and that derisks drilling exploration drilling to some degree. You'll never completely derisk exploration drilling, but to some degree data led using good quality seismic, using AI algorithms to light up the rock in a way we never could before has made a difference.

I think the exploration team have a mission. Their mission is to fill up our hopper with great resource that we can then bring forward to invest in as major projects. The one thing we're not doing is is just throwing money at it. It's quality through choice. We actually haven't increased our exploration budget very much in the last twelve months, so we're forcing the teams to select the very, very best opportunities that we have, the most material and those that we think are going to come in.

There are many, many things that excite me outside Brazil in the exploration world. But if I could just highlight West Africa and particularly Angola and Namibia, where of course we invest under the Azul joint venture with E and I. And we've recently had a discovery in Namibia with the Capricornus well and there's more to come there. We've just spudded the next well called Voulans in Namibia. And then again under the Azul brand, we had a discovery in Gajajera in Block 114, pretty close to shore, very developable.

So West Africa remains an exciting area for us in terms of exploration.

Speaker 8

And so what I'll what I'll what I'll add is, in seismic, we are one of the leaders in seismic technology. So we have been for a number of years, and we're continuing to invest to build to build on that lead. Some of the investments that we're looking at are both investments in compute and investments in the seismic algorithms, and these two things go together. On the compute side, what we have done is we have quadrupled this capacity of our high performance computing center. This has allowed us to increase the speed at which we can do our our processing by about five to 10 times, and some steps actually are increased by 50 times.

What all of this does put together is it actually helps the subsurface teams to increase the the speed at which they can build a hopper. It helps to to better exploit the resources that we have right now. It helps it helps the teams to actually build quality through choice as Gordon is talking about. And we're using a lot of this we're doing both in partnership with NVIDIA and with the deep expertise our teams have built over time. So that that's some of the contribution I think I would I would add from Seismic from the technology perspective.

Murray Auchincloss (CEO & Director)

Super guys. A bit of a long answer to to a complicated question, but I'd round it off, Todd, by saying we got fantastic petrotechnical capability. It has always been strong and remains strong and we're really proud of the results. So well done, Craig?

Ryan Todd (MD & Senior Research Analyst)

Thank you.

Craig Marshall (SVP & Head - IR)

Thanks, Ryan. We'll move next to Peter Low at Redburn. Peter?

Peter Low (MD - Energy Equity Research)

Hi. Yes. Thanks. Perhaps just on BPX. There's a step up in production this quarter, and you've now brought online your fourth and final delivery center in the Permian.

What should we expect for the production trajectory from here for that business? And then the second question was just to go back to convenience mobility. As you say, it's particularly strong results. I think the strongest for quite some time. It sounds like that's not coming from TA.

So can you perhaps elaborate where that improvement is coming from? Thanks.

Murray Auchincloss (CEO & Director)

Yep. Great. I'll let Gordon think about BPX while I answer CNN. CNN's performance is very broad based. We've seen exceptionally strong results across C And M Americas, C And M Europe, C And M Asia, so it's coming from all the convenience and mobility businesses there.

That's tight cost control management of product and managing margin effectively. We're near record levels of profitability in aviation. And of course, you can see the eight great quarters in a row for Castrol. I think the last thing to say is the midstream supply teams are really looking hard at optimizing our value chains, and we're pushing further down value chains to try to optimize margin, bringing trading midstream closer and closer together as we work together to drive real outcomes. And that's another source of brilliant performance from the teams.

And I look forward for continuing strength in this space especially. So I hope that helps, Peter. And Gordon, over to you on BPX production trajectory.

Gordon Birrell (EVP - Production & Operations)

Yes. Hi, Peter. BPX production, our strategy laid out during Capital Markets Day remains the same, which is, 7% CAGR through to 2030, growing the business to 650,000 barrels per day by 2030 and that stays on plan. Of course, it won't be a perfectly straight line through to 02/1930, but the overall strategy remains the same. 1Q to 2Q production was particularly strong, 16% quarter to quarter growth 1Q to 2Q and really strong production.

Efficiency is coming through strongly. That's what I observed in BPX under the leadership of Kyle Kuntz and his team. Some of the capital productivity metrics continue just to improve. On the NPV per section metric, we're one, two or three across the three basins that we operate in and reserves per foot drilled were top quartile across our three basins that we drill in and we're number one in the Black Hawk and the Haynesville. So and these metrics just keep improving as the team focus on them.

So production is strong and we expect it to continue to be strong through this year.

Craig Marshall (SVP & Head - IR)

Thanks, Gordon. Thank you, Peter. We'll go next to Doug Leggate at Wolfe in The US. Morning, Doug.

Doug Leggate (MD & Senior Research Analyst)

Morning, Craig. Morning, everybody. Thanks for taking my question. I actually have a a follow-up on BPX. Maybe I'll direct it to Gordon given he answered the last one.

Gordon, you had you had the reorientation of the, partnership with Devon Energy. And my understanding is you got a disproportionate share of wells in progress that probably helped your volume in q two. So I'm just wondering if that was a one over, if you expect that to be the new baseline to grow off. We did have a chance to talk to Kyle about this, and it seemed to us that there was some upside risk to that longer term growth target. That's my first one.

And my second one is is is for, Murray. Murray or or maybe Kate, if I if I look at slide 15 in your deck, when you're talking about the structural cost cutting, the cost savings, you've got 900,000,000 this year to date, but an offset is 800,000,000 of, you know, the growth and the organic, the acquisition piece. So my question is how much of the 4 to 5,000,000,000 over the 2027 timeline would you expect to also have offsets? In other words, how much would actually flow through to the bottom line? Thank you.

Murray Auchincloss (CEO & Director)

Super. I'll let, Kate, take the structural cost conversation and then, Gordon to take Devon. Go ahead, Kate.

Kate Thomson (CFO & Director)

Yeah. Hello, Doug. Good morning. Yeah. With regard to the structural cost reductions, so $1,700,000,000, so far since we announced the 4 to $5,000,000,000, of structural cost reductions.

As I look through the first half in particular of this year, if you see you can see the bricks that we're trying to be as explicit as we can in terms of what are the costs that are going up in our organization versus how is the structural cost reduction offsetting those. We said we were gonna grow the upstream. That's a key part of our strategy, and we're doing that. That brings cost with it. So as you can see from the first half results, we've added about 200,000,000 of costs associated with higher production in BPX Energy and bringing major projects online.

The other thing that's gone on with regard to growing the organization is the acquisition costs associated with Lightsource BP and BP Bioenergy. We also have, environment, so inflation around 400,000,000. 300 of that was inflation, in the first half of the year. And then more than offsetting that is the 900 of reductions going the other way to deliver the absolute cost reduction. As I look forward of the four to five billion dollars, I want to see material cost reductions flowing all the way down to the bottom line.

That's good for us. It's good for our shareholders. In terms of quantification, it's it's very hard to call it, Doug, because it's very hard to see what's going to go on with regard to inflation in the environment. We've seen wicked inflation, in the last three or four years. I I don't wanna box myself in by predicting what that's going to to become.

But you can hear, think, from the tone of what we're saying today that we are relentless in our drive to to get as competitive and and as lean as we can within the boundaries of safe operations and growing our organization for long term shareholder value.

Gordon Birrell (EVP - Production & Operations)

Hi, Doug. Thanks for the question. The first thing I would say is we're very happy with the value uplift from the Devon transaction. Devon had been a tremendous partner for many years. We worked well with them in that part of the Lower 48, but it was time to simplify and do our own thing.

So we're very pleased with the value uplift. We're very pleased with the transaction. To be specific on your question, the amount of production that came with the transaction was very, very small. Now it will grow as we bring some of the drilled uncompleted wells online, but it doesn't represent a massive new baseline for our growth. It's relatively small wedge.

Doug Leggate (MD & Senior Research Analyst)

All right. Thank you.

Craig Marshall (SVP & Head - IR)

Thanks, Doug. We'll take the next question from Biraj Bokhitary at RBC. Biraj?

Biraj Borkhataria (Global Head - Energy Transition Research)

Hi. Thanks for taking my question. I wanted to go back to the comments around the strategic review or thorough review of the portfolio because you obviously did a thorough review ahead of the CMD. So does this mean you start with a blank sheet of paper again Or should investors assume this review is for things over and above what you've already announced? And the question relates to Castro because if you're doing a thorough review of capital allocation, would it make sense to do a big transaction like that? Or would you wait for it to kind of finish the process?

And then the second question, just on the financial frame and net debt. I see reported net debt going down, but the lease stack is going up and also the lease costs are creeping higher again. Could you just talk about from here whether you'd expect the sort of total leases to be stable from here or move up or down? Or what exactly is driving that? Thank you.

Murray Auchincloss (CEO & Director)

Biraj, on the first one, we obviously are starting our portfolio review from where we stand now. So we made a bunch of decisions back in February, and we've had a whole bunch of additions to the portfolio from the upstream that I talked about. And within a 13 to $15,000,000,000 frame, we now need to think what's the right priority driving value and returns on behalf of shareholders. There's no change to the divestment program. We continue to have a $20,000,000,000 divestment program, and we continue pushing Castrol forward.

So rest assured, this is all about trying to stay within the strategy, accelerate the delivery of it, but, of course, continuing to drive quality through choice, which we live and breathe each and every day. Kate, over to you on, the other question.

Kate Thomson (CFO & Director)

Yeah. Hi, Baraj. Just on leases. So, the way that we think about leases is pretty different from the way that we think about debt. At the end of the day, we're incurring leases directly to drive value in terms of of production, etcetera.

And as you look at what's happened year on year, our our our lease liability has grown by about 4,000,000,000, from this time last year. Just over 2,000,000,000 of that is the accounting for the, floating LNG in Mauritania and Senegal. To my point, it's about driving production. Offsetting that is about 900,000,000 of recoverable, which we'll receive from our partners, in respect of those lease costs. There are a couple of other moving parts.

So we we brought onto our books about 600,000,000 of leases associated with the BP Bioenergy acquisition. There was a lease renewal of about 400 in one of our refineries in The US, and then there's some trading around, lease opportunities, which I won't disclose because that's commercially sensitive. So leases are an area that we step into deliberately to drive value for shareholders, and I think they're appropriate. We, of course, are testing them to make sure they are a value of value to us. But with regard to the forward shape of it, I mean, I I it will depend on very specifically on on some of the big moving parts, particularly in our upstream portfolio.

We've been talking a lot about Brazil and Boomerangian on this call. Now if that if that moves at pace, I can foresee a number of lease situations potentially around, FPSOs over in Brazil that will be added to that, and rightly so with regard to our lease liability on our balance sheet. So it's very difficult to guide going forwards. It depends on the resource allocation decisions that we step through as we get to each final investment decision.

Murray Auchincloss (CEO & Director)

Thanks, Biraj.

Craig Marshall (SVP & Head - IR)

Thank you, Biraj. I'm going to jump back on to the telephones now for two questions. First one from Paul Cheng at Scotiabank. Paul?

Paul Cheng (Analyst)

You. Good morning or good afternoon. Gordon, I want to go back into the b x BPX. The second quarter, the production increase is quite impressive. Is it all coming from Permian?

And also, can you give us some idea then how's the Haynesville, your drilling and development plan is going to look like for the remaining of the year into next year? Are you adding any weight over there? The second question, I want to go back into the the Brazil. Can you give us some kind of, idea? Let's assume that you're going to take multiple boat, for the development because the rest of it is very big.

And from a course recovery standpoint, yes, all the course is in one pool or that is individual project basis. And can you give us some idea that the time line, I will assume to fully delineate that you may need at least, say, three or four a peso well. So is that the earliest that you have everything go, say, according to plan, maybe a 2000 late two thousand twenty seven or early two thousand twenty eight FID? Thank you.

Murray Auchincloss (CEO & Director)

Gordon, I'll let you I'll let you do Brazil, and answer BPX to give you a bit of relief. Why don't you start off with Brazil?

Gordon Birrell (EVP - Production & Operations)

Yes. Thank you. Hey, Paul. Thanks for the question. I'll answer the easy one first.

The terms of the lease that we have in BREO are public knowledge and it's one cost pool. So everything is funded through a single cost recovery pool. And then I would expect we need to get the results back from the lab on the full composition analysis, which will inform the hydrocarbon that we have in the column and that will then inform the detail of the appraisal program. So we have more work to do to plan it, but I would expect as you see, you start a three or a four well appraisal program to allow us then to move to a full field development. I wouldn't speculate exactly when we would have that appraisal program done, but we will move at pace as soon as we get these results back.

And in fact, of course, we'd done some pre drill work already on what an appraisal program would be. We're not starting from scratch, but we'll move at pace on appraisal.

Murray Auchincloss (CEO & Director)

Fantastic. Thanks, Gordon. And then on BPX, just to step into Gordon's space a bit. The growth between 1Q and 2Q, principally the Permian with the ramp up of Crossroads as well as an awful lot of work on refracs and infill drilling in the Eagle Ford. Just to remind you, the refracs are working fabulously and the infill program on wells drilled a decade ago are twice as productive as the original wells.

That's just the changing technology on frac over time. So we're seeing a lot of growth out of the Eagle Ford. You should expect liquids assuming prices stay relatively stable, you should expect liquids production out of BPX to continue grow through the decade. Of course, if price moves up or down, we may change that capital allocation, but that's our sense right now. As far as the gas basins, I think the first thing I'd say is capital productivity is really improving.

We're about 10% year on year improvement in capital productivity right now. In the Haynesville, they just drilled their first U well. So that's a vertical well and a big U with fracs on the straight sides of the U. Obviously, you don't frac into the U, and we were getting tremendous productivity out of that. We're seeing from three well pads, a 160,000,000 scuffs a day out of three well pads, and with the capacity to get up to 180 if we can solve certain metallurgy issues.

So I think productivity is fantastic, and the business is actually holding gas production relatively flat around two to three rigs. That's across the Permian, the Haynesville, the Eagle Ford, the Hawkville, etcetera. So the team's doing a very, very good job in that space. As far as what we'll do with '26 and '27 ramp up, that's still something that we're thinking about. We're watching gas prices.

We have started hedging out 'twenty six and 'twenty seven, and that will determine how much we lean into that space by adding rigs. That's a decision we'll make in the fall as we head towards our 2026 capital allocation. So ask me again next quarter, and we can answer that question. Thank you, Paul.

Paul Cheng (Analyst)

Thank you.

Craig Marshall (SVP & Head - IR)

Thanks, Murray. Thank you, Paul. We'll go to stay on the phones and go to Chris Kuplent at Bank of America. Chris?

Christopher Kuplent (Research Analyst)

Thank you. I hope you can hear me okay. Two quick questions for me remaining. First one for you, Kate. Can you square the circle for us a little bit on disposal proceeds and your net debt guidance for the end of the year.

I noticed TANAP has been structured as an equity raise. How does that relate eventually to a net debt reduction in the way you consolidate it? And are there other, niggles for us to be aware of in terms of how you structure some of these disposals that have been announced? And then the, the second one, back to Murray or perhaps Gordon. On the topic of strategic review and what else you might think of, around your portfolio, you're one of the last, super majors with UK North Sea assets, not in some sort of new JV.

You've pioneered, the structure you've, kicked off with Aker BP in in Norway. Are there, is The UK a particular focus, for yourself as you review potential portfolio changes? Maybe you can, comment on the value of that in your portfolio. Thank you.

Murray Auchincloss (CEO & Director)

Great. Thanks, Chris. Gordon, why don't you tackle North Sea and then I'll hand over to Kate on divestment proceeds.

Gordon Birrell (EVP - Production & Operations)

Yes. Thanks, Chris. The North Sea, it's we've a proud history and we're proud of the team up there producing for over sixty years now and it's been a tremendous piece of business. The reason we haven't jumped into a joint venture is we believe we've got the best portfolio up there and that's been our view for quite a while. However, we're also monitoring any potential changes to the fiscal situation in the North Sea, which we expect to get some clarity on at some point this year.

And then I think once we get clarity on the fiscal situation, we'll then make decisions. So it's just too early. We've got to get a little bit more information on the North Sea. I would say North Sea performance this year in terms of safety, production, cost has been tremendous. And so they really have stepped up and the plant has been the production facilities have been much more reliable than they were the last couple of years.

So kudos to the team up there, but we stay and we watch and we see what happens with the review of the fiscal.

Murray Auchincloss (CEO & Director)

Kate?

Kate Thomson (CFO & Director)

Yes. So hi, Chris. In terms of net debt guidance, firstly, I'd say that we are expecting our strong operations to continue. Gordon is doing a great job of the kit staying up and available. So we we plan on that continuing.

I've talked you through a level of working cap release through the second half of the year that we expect to come through. And then the the other major moving part is around divestment proceeds. So we've signed three. We've had divestment proceeds in the door of 1.7. And your specific question with regard to, TANAP, this decapitalization of pipelines, think, is a a sensible way to approach our our our infrastructure.

We don't need to own them, but we do need to have control over the ability to to move our equity production to market. So the way we account for it is proceeds. We receive the cash, but then it's accounted for through non controlling interest. So you see that line going through the balance sheet sheet and you'll see it going through the income statement as well each quarter.

Murray Auchincloss (CEO & Director)

Thank you, Kate. Craig?

Craig Marshall (SVP & Head - IR)

Thanks, Chris. We'll come back to, Teams and take the next question from Kim Fuscia, HSBC. Kim?

Kim Fustier (Head - European Oil & Gas Research)

Yeah. Hi. Good afternoon. Thanks for taking my questions. I had two, please.

Firstly, I wanted to ask about the strength in underlying cash flow ex working capital over 7 and a half billion dollars, which was quite impressive. I noticed that the quarter on quarter increase was sort of half a billion dollars more than the increase in net income this quarter. So could you maybe talk about the moving parts there? Was there anything unusually strong about this quarter? Any larger dividends from associates, for instance, or or lower cash tax payments?

And then my second question is on the Gulf Of America. I believe you're now in a farm down process on your paleogene assets, Kaskidi and Tybur. What's the level of interest from industry, and and what would what do think would be the best time to farm down? Would it be at the point of FID for Tiber, and and when when might that be, or would it be later during the development phase? Thank you.

Murray Auchincloss (CEO & Director)

I'll take Gulf America to give Gordon a break, and I'll pass over to Kate on underlying, I think, tax is the answer. As far as Gulf Of America goes, we're in conversations with counterparts on Cascadia. We will continue doing that, and see if, see what's possible if we can get value for shareholders. If we can, great. We can't, then we're happy to carry on for 100%.

And then Tiber, we expect to bring to sanction this year. Just waiting for that to be brought up to the resource committee and to the board. And clearly, we won't do anything until we've FID ed that, But we can consider, given that we have 100% in both, that we bring in a partner. And the only question is, at what time do we think we can maximize value for shareholders? And we're in conversations with counterparts.

There's, of course, lots of interest for premium assets such as this, and we just need to make sure we get the right value for shareholders as we move through that conversation. Kate, underlying underlying EBITDA and earnings, I guess?

Kate Thomson (CFO & Director)

Yes. So so hi, Kim. Excluding working capital, yeah, our our ops cash effectively grew by $1,500,000,000, quarter on quarter. Around a billion of that is due is due to underlying earnings, and in particular, I'd call out better trading, better gas trading, and better oil trading. And the other the other major component is lower cash taxes, over 200,000,000 quarter on quarter.

And then there's another slew of of various smaller drivers, nothing worth calling out.

Murray Auchincloss (CEO & Director)

Strong underlying performance, though, Kim, I think is the the core message, really strong underlying And done to the teams for delivering it.

Craig Marshall (SVP & Head - IR)

Yes. Thank you, Kim. We'll go to the next question from Lucas Herman at BNP Exane. Lucas?

Lucas Herrmann (Managing Director)

Craig, thanks very much, and nice to see some momentum returning to the business. A couple, if I might. Kate Murray, one big beautiful bill. Fiscal implications for you, corporate tax in particular, if I could start there. And then the second, really, just probably to Gordon.

But I mean, going back to refining, the last two, three years, we have seen a lot of five year turnarounds, a lot of downtime, production. The run rates, as you highlighted, have been very good, but they've been very good should we say, muted available capacity. As we look forward over the next year or two, how should we think about availability within that business, let alone uptime? You.

Murray Auchincloss (CEO & Director)

Gordon, you want to lead off on refining all tax? Of the tax?

Gordon Birrell (EVP - Production & Operations)

Yeah. Absolutely. Hi, Lucas. Thanks for the question. You know, just as a reminder, the the 2223 time frame, we were catching up on TARs from the the backlog, during COVID.

I'd say 2425, a more normal period of turnarounds. However, 2Q twenty twenty five was particularly high and we've guided through to be slightly to be lower TARs for lowest TAR outages for the balance of 2025. And then as we go forward into twenty six, twenty twenty seven, we should see lower turnarounds relative to 2024, 2025, Lucas. So we'll be on the ramp down on tower days relative to twenty twenty four, twenty five as we go into twenty twenty six, twenty seven. And I hope, I believe we can hold on to the availability that we've been delivering this half as we go through twenty twenty six, twenty seven, that's the mission.

Murray Auchincloss (CEO & Director)

And then I think on I think on The US legislation, we're very positive on it. The US is a very big operation for us. 60% of our profitability and cash flow comes from The United States. We invest 50% to 60% of our capital there as well. So it's a it's a massive business for us, and we're very proud to support The United States in growing their energy production.

We look forward to growing production out of both the Gulf Of America and BPX by, I think it's 10% per annum out through the end of the decade. So we're pleased with that. The tax bill that came through was very favorable to us. Obviously, it sustained the corporate tax rate at 21%, and the immediate expensing really helps offset any pressure from tariffs as well. So there wasn't it was very positive for us, Lucas, and it's very positive for us in The United States.

And we're excited and happy to be continuing Murray, to drive growth in U.

Lucas Herrmann (Managing Director)

Is there any quantifiable benefit you can think about at this stage? Sorry for the echo.

Murray Auchincloss (CEO & Director)

On from a financial perspective, it wasn't like we were accruing a higher tax rate of or anything like that. So it's it's just a it's a continuation of the 21%. And then cash taxes would offset anything in tariffs, I think, is all I would say at this stage, although tariffs are highly variable. So I think it's not it's not material, but it's very positive for us, Lucas. I can't really say more than that right now.

Lucas Herrmann (Managing Director)

Okay. Thank you.

Craig Marshall (SVP & Head - IR)

Lucas. We'll take the next question from Henry Tarr at Berenberg. Henry.

Henry Tarr (Director - Co-Head of Energy & Environment Research)

Hi there, and and thanks for thanks for I had two. There was a strong rebound in, the gas and low carbon business in the quarter. How do you think about that as you look into the second half and into next year? One of your peers pointing for some different reasons perhaps, but but to a slightly lighter outlook as we look into 2026. So I wonder how you see that business.

And then and then the second question, in your sort of early interactions with the new chairman, what have the discussions mainly been focused on? So clearly, there's the change around the portfolio and and looking into that. But which areas do you think he might have the most impact on in the organization? Thank you.

Murray Auchincloss (CEO & Director)

Super Henry. Look. First, I'm really excited for Albert to come on board. He's got a tremendous track record at CRH. Ten years of fantastic delivery, experiencing many of the industrial challenges that we face in an oil and gas company as well.

So, you know, it'll be it'll be fantastic to have Albert on board full time. We've been in conversations early on, and, you know, the question is how do you drive shareholder value as much as you can? How do you get really, really disciplined with capital investing for returns and value as much as you can? And how do you drive real competitive cost tension into the business to make sure that we challenge our self day in and day out to be the very best in the basins which we operate, which Kate unpacked a little bit earlier. So it's a hard performance drive.

I think from a portfolio perspective, too early to judge anything. We just need to go through this and work together to see what makes the most sense for us across the portfolio, given the richness of the opportunity set that sits with us. So we'll look forward to updating you in due course on that space. I think on gas and low carbon, maybe you were asking a gas trading question. Maybe that's what that was.

I'm not sure, Henry, if that's what you were really asking.

Henry Tarr (Director - Co-Head of Energy & Environment Research)

Partly gas trading. Yes.

Murray Auchincloss (CEO & Director)

Partly gas trading. Yeah. Think I it's mostly gas trading. No change of assumptions for us. We run our business differently than other corporations do.

We run our gas trading business for optionality. And whether the market is oversupplied or undersupplied, what we look for is volatility, where we can redirect. As Carol talked about in February, 50% of our LNG business is redirectable in 'twenty five, growing to 60% in 2026. So if you have a geographic arbitrage, you if have a time arbitrage, we don't really slave ourselves to a percentage point of some slope. We don't do point to point.

We try to get this optionality. So there shouldn't be any change in what our assumptions are for trading. In the past, we have delivered 4% across the past five years, and we would expect that to continue in the future. So no change to our viewpoint on how our gas trading business will do. And of course, we've got exciting new things that have been brought online recently.

Obviously, Ventures flowing to us now. Mauritania in Senegal is flowing to us now. And something that doesn't get many headlines is we started up GNA phase two in Brazil where we've got a three gigawatt power plant in Brazil with a one to three million one million to three MTPA short into Brazil that we have exclusive access to. So an interesting new addition to the leg of trading moving forward. So hopefully that answers your question on gas and low carbon, Henry.

Craig Marshall (SVP & Head - IR)

Super, Henry. We are five minutes over time. So I appreciate I think there's a couple of questions pulling for a second time. Please relay those questions back to Investor Relations. We'll certainly get answers back to you.

My thanks to everybody on the panel and maybe I can just hand back over to Murray to close the call.

Murray Auchincloss (CEO & Director)

Super. Well, thanks to Gordon, Emma, Kate and thanks to the entire BP team for delivery. It was another strong quarter for BP operationally and strategically and encouraging progress. But as I've said, this is two quarters in of a twelve quarter program, and there's a lot more to do across the next ten quarters. We are fully focused on delivering safely, reliably, investing with discipline, and driving performance improvements across all parts of the business, all in service of delivering our four key targets.

And in maximizing long term shareholder value, we can and will do better. Thanks for listening. And for those taking vacation, I wish you a peaceful and relaxing break. And we look forward to talking with you soon. Thank you. Bye bye.