Second quarter and half year 2021

Strong results and continued net debt reduction in an improving environment

• Operating performance was resilient in the second quarter with four major project* start-ups, strong momentum in the customers business, including material growth in convenience gross margin*, and delivery of $2.5 billion of cash costs* savings on a run-rate basis relative to 2019, around six months earlier than targeted.

• Reported profit for the quarter was $3.1 billion, compared with $4.7 billion for the first quarter 2021.

• Underlying replacement cost profit* was $2.8 billion, compared with $2.6 billion for the previous quarter. This result was driven by higher oil prices and margins offset by a lower result in gas marketing and trading.

• Operating cash flow* of $5.4 billion includes $1.2 billion pre-tax of Gulf of Mexico oil spill payments within a working capital* build of $0.5 billion (after adjusting for inventory holding gains and fair value accounting effects).

• Net debt* fell to $32.7 billion at the end of the second quarter.

• Following the annual review of price assumptions used for investment appraisal and value-in-use impairment testing, bp's Brent oil price assumption to 2030 is increased to reflect expected supply constraints, while longer-term assumptions are lowered as bp expects an acceleration of the pace of transition to a low carbon economy.

• As a result of these changed assumptions, the reported result includes a pre-tax net impairment reversal of $3.0 billion.

Distribution growth within disciplined financial frame

• A resilient dividend is bp's first priority within its disciplined financial frame.
  
• Reflecting the underlying performance of the business, an improving outlook for the environment, confidence in our balance sheet and commencement of the share buyback programme, the board has announced an increase in the second quarter dividend of 4% to 5.46 cents per ordinary share. This increase is accommodated within a 2021-5 average cash balance point* of around $40 per barrel Brent, $11 per barrel RMM and $3 per mmBtu Henry Hub (all 2020 real).
• bp generated surplus cash flow* of $0.7 billion in the second quarter and $2.4 billion in the first half after having reached its net debt target of $35 billion. Taking into account surplus cash flow* generated in the first half of the year, bp intends to execute a share buyback of $1.4 billion prior to announcing its third quarter 2021 results. For 2021, and subject to maintaining a strong investment grade credit rating, the board remains committed to using 60% of surplus cash flow for share buybacks and plans to allocate the remaining 40% to continue strengthening the balance sheet.
• On average, based on bp’s current forecasts, at around $60 per barrel Brent and subject to the board's discretion each quarter, bp expects to be able to deliver buybacks of around $1.0 billion per quarter and have capacity for an annual increase in the dividend per ordinary share of around 4%, through 2025. Other elements of the financial frame are unchanged.
• The board will take into account factors including the cumulative level of and outlook for surplus cash flow, the cash balance point and the maintenance of a strong investment grade credit rating in setting the dividend per ordinary share and the buyback each quarter.
• bp expects to outline plans for the fourth-quarter share buyback at the time of its third quarter results.

Strong progress in our transformation to an integrated energy company

• Since outlining its new strategy a year ago, bp has made strong progress in its transformation to an IEC. It has delivered 8 major projects*, built a 21GW renewable pipeline, grown convenience and electrification, reorganized, reached over $10 billion of divestment proceeds, strengthened the financial frame and begun share buybacks.
• Four major projects began production in the second quarter – in India, Egypt, Angola and the Gulf of Mexico.
  
• bp has continued to significantly expand its renewables pipeline, buying a 9GW solar development pipeline in the US. Lightsource bp also continued to expand, growing in Portugal, Spain, Greece and Australia. bp confirmed its intention to bid for offshore wind leases in Scotland with EnBW and in Norway with Statkraft and Aker.
  
• bp opened the UK’s first fleet-dedicated EV rapid charging hub in London, the first of a series intended for cities across Europe. In the US, bp agreed to take full ownership of the Thorntons business, which is expected to complete in the third quarter of 2021, positioning bp to be a leading convenience operator in the Midwest US.

(a) This results announcement also represents bp's half-yearly financial report (see page 16).

(b) Prior to 2021 adjusting items were reported under two different headings – non-operating items and fair value accounting effects*. See page 32 for more information.

(c) Divestment proceeds are disposal proceeds as per the condensed group cash flow statement. Other proceeds were $675 million from the sale of a 49% interest in a controlled affiliate holding certain refined product and crude logistics assets onshore US in the first quarter and first half 2021 and $455 million in relation to TANAP pipeline refinancing in the second quarter and first half 2020. There are no other proceeds in the second quarter 2021.

(d) See Note 9 for more information.

RC profit (loss), underlying RC profit (loss) and net debt are non-GAAP measures. Inventory holding (gains) losses and adjusting items are non-GAAP adjustments.

* For items marked with an asterisk throughout this document, definitions are provided in the Glossary on page 38.

Further information

Contacts

bp press office, London: +44 (0)20 7496 4076, bppress@bp.com

Cautionary statement

In order to utilize the ‘safe harbor’ provisions of the United States Private Securities Litigation Reform Act of 1995 (the ‘PSLRA’) and the general doctrine of cautionary statements, bp is providing the following cautionary statement: The discussion in this results announcement contains certain forecasts, projections and forward-looking statements - that is, statements related to future, not past events and circumstances - with respect to the financial condition, results of operations and businesses of bp and certain of the plans and objectives of bp with respect to these items. These statements may generally, but not always, be identified by the use of words such as ‘will’, ‘expects’, ‘is expected to’, ‘aims’, ‘should’, ‘may’, ‘objective’, ‘is likely to’, ‘intends’, ‘believes’, ‘anticipates’, ‘plans’, ‘we see’ or similar expressions.

In particular, the following, among other statements, are all forward looking in nature: expectations regarding the COVID-19 pandemic, including its risks, impacts, consequences, duration, continued restrictions, challenges, bp’s response, the impact on bp’s financial performance (including cash flows and net debt), operations and credit losses, and the impact on the trading environment, oil and gas prices, and global GDP; expectations regarding the shape of the COVID-19 recovery and the pace of transition to a lowercarbon economy and energy system; plans, expectations and assumptions regarding oil and gas demand, supply or prices, the timing of production of reserves, or decision making by OPEC+; expectations regarding refining margins, refinery utilization rates and product demand; expectations regarding bp’s future financial performance and cash flows; expectations regarding future upstream production and project ramp-up; expectations regarding supply shortages; expectations with respect to completion of transactions and the timing and amount of proceeds of agreed disposals; expectations with regards to bp’s transformation to an IEC; plans and expectations regarding bp’s financial framework; expectations regarding quarterly dividends and share buybacks, including bp’s plan to increase the second quarter dividend by 4% per ordinary share, bp’s expectation based on its current forecasts, at an oil price of around $60 per barrel Brent and subject to the Board’s approval each quarter of being able to deliver a buyback of around $1.0 billion per quarter on average and have capacity for an annual increase in the dividend per ordinary share of around 4% through 2025, and plan to commence a buyback from first half surplus cash flow; expectations of executing a share buyback of $1.4 billion prior to announcement of third quarter 2021 results; expectations of outlining plans for the fourth-quarter share buyback at the time of bp’s third quarter results; plans and expectations of using 60% of surplus cash flow for share buybacks and plans to allocate the remaining 40% to strengthen bp’s balance sheet for 2021; expectations regarding demand for bp’s products; plans and expectations with respect to the total capital expenditure, depreciation, depletion and amortization, expected tax rate and business and corporate underlying annual charge for 2021; plans and expectations regarding net debt; plans and expectations regarding the divestment programme, including the amount and timing of proceeds in 2021, and plans and expectations in respect of reaching $25 billion of proceeds by 2025 and expectations that divestment and other proceeds for 2021 will be in the $5-6 billion range; plans and expectations regarding bp’s renewable energy and alternative energy businesses; expectations regarding reported and underlying production and related major project ramp-up, capital investments, divestment and maintenance activity; expectations regarding price assumptions used in accounting estimates; expectations regarding the underlying effective tax rate for 2021; expectations regarding the timing and amount of future payments relating to the Gulf of Mexico oil spill; plans and expectations that capital expenditure, including inorganic capital expenditure, will reach around $13 billion in 2021; plans and expectations regarding new joint ventures and other agreements, including partnerships and other collaborations with EnBW, Statkraft, Aker Offshore Wind, Equinor, Eni, Marks & Spencer, PAYBACK, Ki Mobility, Daimler, BMW, Qantas, Azerbaijan, Infosys, CEMEX and the Mærsk Mc-Kinney Møller Center for Zero Carbon Shipping as well as plans and expectations regarding LSbp’s acquisitions from Iberia Solar and RIC Energy and its activities in Australia, bp’s blue hydrogen production facility, bp’s Mad Dog 2 development in the Gulf of Mexico, the transfer by bp of its participating interests in six blocks located in Foz do Amazonas basin off northern Brazil, bp’s exploration at the Puma West prospect, bp’s announced agreement to take full ownership of the Thorntons business in the US with completion in the third quarter of 2021 and Air bp’s rollout of sustainable aviation fuel; plans and expectations regarding bp’s intention to bid with EnBW to develop offshore wind in the UK North Sea; plans and expectations regarding bp’s plans to join Statkraft and Aker to develop offshore wind power in Norway and pursue a bid in the Sørlige Nordsjø II (SN2) licence area; plans and expectations for bp’s work on EV charging, including the development of EV charging networks in the UK and Europe and bp’s investment into IoTecha; plans and expectations regarding the listing of Lightning eMotors; plans and expectations regarding Launchpad portfolio companies; and expectations regarding operational and financial results or acquisitions or divestments by Rosneft, and expectations with respect to Rosneft dividends.

By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will or may occur in the future and are outside the control of bp.

Actual results may differ materially from those expressed in such statements, depending on a variety of factors, including: the extent and duration of the impact of current market conditions including the volatility of oil prices, the impact of COVID-19, overall global economic and business conditions impacting our business and demand for our products as well as the specific factors identified in the discussions accompanying such forward-looking statements; changes in consumer preferences and societal expectations; the pace of development and adoption of alternative energy solutions; developments in policy, law, regulation, technology and markets, including societal and investor sentiment related to the issue of climate change; the receipt of relevant third party and/or regulatory approvals; the timing and level of maintenance and/or turnaround activity; the timing and volume of refinery additions and outages; the timing of bringing new fields onstream; the timing, quantum and nature of certain acquisitions and divestments; future levels of industry product supply, demand and pricing, including supply growth in North America and continued base oil and additive supply shortages; OPEC+ quota restrictions; PSA and TSC effects; operational and safety problems; potential lapses in product quality; economic and financial market conditions generally or in various countries and regions; political stability and economic growth in relevant areas of the world; changes in laws and governmental regulations; regulatory or legal actions including the types of enforcement action pursued and the nature of remedies sought or imposed; the actions of prosecutors, regulatory authorities and courts; delays in the processes for resolving claims; amounts ultimately payable and timing of payments relating to the Gulf of Mexico oil spill; exchange rate fluctuations; development and use of new technology; recruitment and retention of a skilled workforce; the success or otherwise of partnering; the actions of competitors, trading partners, contractors, subcontractors, creditors, rating agencies and others; our access to future credit resources; business disruption and crisis management; the impact on our reputation of ethical misconduct and non-compliance with regulatory obligations; trading losses; major uninsured losses;decisions by Rosneft’s management and board of directors; the actions of contractors; natural disasters and adverse weather conditions; changes in public expectations and other changes to business conditions; wars and acts of terrorism; cyber-attacks or sabotage; and other factors discussed elsewhere in this report, as well those factors discussed under “Risk factors” in bp Annual Report and Form 20-F 2020 as filed with the US Securities and Exchange Commission.