EQS-Adhoc: BP p.l.c.: 2Q23 SEA Part 1 of 1

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“For a printer friendly version of this announcement please click on the link below to open a PDF version of the announcement”

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

2. Divestment proceeds are disposal proceeds as per the condensed group cash flow statement. See page 3 for more information on divestment and other proceeds.

3. See Note 10 for more information.

RC profit (loss), underlying RC profit (loss), surplus cash flow, net debt, adjusted EBITDA, underlying RC profit per ordinary share and underlying RC profit per ADS are non-IFRS measures. Inventory holding (gains) losses and adjusting items are non-IFRS adjustments.

* For items marked with an asterisk throughout this document, definitions are provided in the Glossary on page 35.

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Financial results

In addition to the highlights on page 2:

• Profit attributable to bp shareholders in the second quarter and half year was $1.8 billion and $10.0 billion respectively, compared with a profit of $9.3 billion and a loss of $11.1 billion in the same periods of 2022.

• After adjusting profit attributable to bp shareholders for inventory holding losses* and net impact of adjusting items*, underlying replacement cost profit* for the second quarter and half year was $2.6 billion and $7.6 billion respectively, compared with $8.5 billion and $14.7 billion for the same periods of 2022. This reduction in underlying replacement cost profit for the second quarter and half year reflects lower oil and gas realizations, the impact of portfolio changes in oil production & operations, significantly lower refining margins, and a weak oil trading performance, partly offset by a higher gas marketing and trading result.

• Adjusting items in the second quarter and half year had a net adverse pre-tax impact of $0.6 billion and a net favourable pre-tax impact of $3.3 billion respectively, compared with an adverse pre-tax impact of $0.3 billion and $31.1 billion in the same periods of 2022.

• Adjusting items for the second quarter and half year of 2023 include a favourable impact of pre-tax fair value accounting effects*, relative to management's internal measure of performance, of $1.1 billion and $5.3 billion respectively, compared with an adverse pre-tax impact of $0.8 billion and $6.6 billion in the same periods of 2022. This is primarily due to a decline in the forward price of LNG during the periods, but an increase in the comparative periods. Under IFRS, reported earnings include the mark-to-market value of the hedges used to risk-manage LNG contracts, but not of the LNG contracts themselves. The underlying result includes the mark-to-market value of the hedges but also recognizes changes in value of the LNG contracts being risk managed.

• Adjusting items for the half year 2022 include a pre-tax charge of $24.0 billion relating to bp’s decision to exit its 19.75% shareholding in Rosneft. A further $1.5 billion pre-tax charge relating to bp's decision to exit its other businesses with Rosneft in Russia is also included.

• The effective tax rate (ETR) on RC profit or loss* for the second quarter and half year was 41% and 32% respectively, compared with 33% and -62% for the same periods in 2022. Excluding adjusting items, the underlying ETR* for the second quarter and half year was 43% and 41% respectively, compared with 29% and 30% for the same periods a year ago. The higher underlying ETR for the second quarter and half year reflects changes in the geographical mix of profits and the UK Energy Profits Levy on North Sea profits. ETR on RC profit or loss and underlying ETR are non-IFRS measures.

• Operating cash flow* for the second quarter and half year was $6.3 billion and $13.9 billion respectively, compared with $10.9 billion and $19.1 billion for the same periods in 2022, consistent with the movements in underlying replacement cost profit in the periods.

• Capital expenditure* in the second quarter and half year was $4.3 billion and $7.9 billion respectively, compared with $2.8 billion and $5.8 billion in the same periods of 2022, reflecting the inorganic $1.1 billion spend on the acquisition of TravelCenters of America in the second quarter 2023.

• Total divestment and other proceeds for the second quarter and half year were $0.1 billion and $0.9 billion respectively, compared with $0.7 billion and $1.9 billion for the same periods in 2022. There were no other proceeds for the second quarter and half year of 2023. Other proceeds for the second quarter and half year of 2022 were $0.4 billion and $0.6 billion respectively of proceeds from the disposal of a loan note related to the Alaska divestment.

• At the end of the second quarter, net debt* was $23.7 billion, compared with $21.2 billion at the end of the first quarter 2023 and $22.8 billion at the end of the second quarter 2022.

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Analysis of RC profit (loss) before interest and tax and reconciliation to profit (loss) for the period

Analysis of underlying RC profit (loss) before interest and tax

Reconciliations of underlying RC profit attributable to bp shareholders to the nearest equivalent IFRS measure are provided on page 1 for the group and on pages 6-15 for the segments.

Operating Metrics

1. See Operational updates on pages 6, 9 and 11. Because of rounding, upstream production may not agree exactly with the sum of gas & low carbon energy and oil production & operations.

2. Mainly reflecting impact of portfolio changes.

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Outlook & Guidance

Macro outlook

• For the third quarter, bp expects oil prices to be supported by seasonal demand and the OPEC+ production restrictions.

• During the third quarter, bp expects the risk of an earlier than normal seasonal fill of European gas storage to continue to weigh on European gas and Asian LNG prices absent disruptions to supply. In the US, Henry Hub gas prices are expected to find support from coal-to-gas switching in the power sector.

• In the third quarter, bp expects industry refining margins to remain above historical average levels, supported by low product inventories and seasonal demand in the US.

3Q23 guidance

• Looking ahead, bp expects third-quarter 2023 reported upstream* production to be broadly flat compared to second quarter 2023. Within this, bp expects production from oil production & operations to be lower and gas & low carbon energy to be higher, including the effects of seasonal maintenance in higher margin regions offset by major project* delivery.

• In its customers business, bp expects seasonally higher volumes. In refining, bp expects a lower level of turnaround and maintenance activity compared to the second quarter.

2023 guidance

In addition to the guidance on page 2:

• bp now expects both reported and underlying upstream production to be higher compared with 2022. Within this, bp expects underlying production* from oil production & operations to be higher and production from gas & low carbon energy to be slightly lower. bp now expects four major project start-ups during 2023, with Greater Tortue Ahmeyim (GTA) Phase 1 now expected to start-up during the first quarter of 2024.

• bp continues to expect the other businesses & corporate underlying annual charge to be in a range of $1.1-1.3 billion for 2023. The charge may vary from quarter to quarter.

• bp continues to expect the depreciation, depletion and amortization to be slightly above 2022.

• bp continues to expect the underlying ETR* for 2023 to be around 40% but it is sensitive to the impact that volatility in the current price environment may have on the geographical mix of the group’s profits and losses.

• Having realized $16.8 billion of divestment and other proceeds since the second quarter of 2020, bp continues to expect divestment and other proceeds of $2-3 billion in 2023 and continues to expect to reach $25 billion of divestment and other proceeds between the second half of 2020 and 2025.

• bp continues to expect Gulf of Mexico oil spill payments for the year to be around $1.3 billion pre-tax including the $1.2 billion pre-tax payment made during the second quarter.

• bp continues to expect capital expenditure* of $16-18 billion in 2023 including inorganic capital expenditure*.

• bp is committed to maintaining a strong investment grade credit rating, targeting further progress within an 'A' grade credit rating. For 2023 bp continues to intend to allocate 40% of surplus cash flow* to further strengthening the balance sheet.

• For 2023 and subject to maintaining a strong investment grade credit rating, bp remains committed to using 60% of surplus cash flow for share buybacks.

• In setting the dividend per ordinary share and buyback each quarter, the board will continue to 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.

• Based on bp’s current forecasts, at around $60 per barrel Brent and subject to the board’s discretion each quarter, bp continues to expect to be able to deliver share buybacks of around $4.0 billion per annum, at the lower end of its $14-18 billion capital expenditure range, and have capacity for an annual increase in the dividend per ordinary share of around 4%.

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gas & low carbon energy*

Financial results

• The replacement cost (RC) profit before interest and tax for the second quarter and half year was $2,289 million and $9,636 million respectively, compared with $2,737 million and $1,213 million for the same periods in 2022. The second quarter and half year are adjusted by a favourable impact of net adjusting items* of $56 million and $3,947 million respectively, compared with an adverse impact of net adjusting items of $343 million and $5,462 million for the same periods in 2022. Adjusting items include impacts of fair value accounting effects*, relative to management's internal measure of performance, which are a favourable impact of $1,222 million and $5,156 million for the second quarter and half year in 2023 and an adverse impact of $74 million and $5,089 million for the same periods in 2022. Under IFRS, reported earnings include the mark-to-market value of the hedges used to risk-manage LNG contracts, but not of the LNG contracts themselves. The underlying result includes the mark-to-market value of the hedges but also recognizes changes in value of the LNG contracts being risk managed, which decreased as forward prices fell during the first half. Adjusting items also include a net impairment charge of $1,058 million and $1,060 million respectively, compared with net charges of $265 million and $517 million for the same periods in 2022.

• After adjusting RC profit before interest and tax for adjusting items, the underlying RC profit before interest and tax* for the second quarter and half year was $2,233 million and $5,689 million respectively, compared with $3,080 million and $6,675 million for the same periods in 2022.

• The underlying RC profit for the second quarter and for the half year, compared with the same periods in 2022, both reflect lower realizations and a higher depreciation, depletion and amortization charge partially offset by a higher gas marketing and trading result.

Operational update

• Reported production for the quarter was 903mboe/d, 2.2% lower than the same period in 2022. Underlying production* was 2.9% lower, mainly due to lower base performance partially offset by new project delivery.

• Reported production for the half year was 936mboe/d, 0.9% lower than the same period in 2022. Underlying production was 2.0% lower, also mainly due to lower base performance partially offset by new project delivery.

• Renewables pipeline* at the end of the quarter was 39.6GW (bp net), including 16.6GW bp net share of Lightsource bp's (LSbp's) pipeline. The renewables pipeline increased by 2.4GW during the half year due to additions to LSbp's portfolio. In addition, there is over 10GW (bp net) of early stage opportunities in LSbp's hopper.

Strategic progress

gas

• On 30 June bp and Reliance (operator) announced that production has commenced from MJ, the last of three new deepwater developments in the KG D6 block off the coast of India. Production from the fields is expected to account for around one third of India’s current domestic gas production and meet approximately 15% of India’s gas demand.

• This builds on the progress announced in our first-quarter results, which comprised the following: bp signed an agreement with Shell to purchase Shell’s 27% interest in the Browse project, offshore Australia, subject to approvals; bp and its partners confirmed the development concept for the second phase of the bp-operated Greater Tortue Ahmeyim (GTA) liquefied natural gas project, to take forward to the next stage of evaluation; bp and our co-venturers in the Shah Deniz Consortium have secured additional capacity in the Trans Adriatic Pipeline (TAP); bp announced that it had completed the sale of its upstream business in Algeria to Eni; and bp confirmed that, together with ADNOC, it has made a non-binding offer to take NewMed Energy private.

low carbon energy

• Hydrogen and CCS
  • Hydrogen pipeline* grew by 1.0mtpa in the first half to 2.8mtpa, reflecting projects moving into concept development in the US and Oman.

• Offshore wind 
  • On 12 July, bp was awarded the rights to develop two North Sea offshore wind projects in Germany. The sites are located 130km and 150km offshore, in water depths of about 40m, and have a total potential generating capacity of 4GW, raising our global offshore wind pipeline to 9.3GW.

• These events build on the progress announced in our first-quarter results, which comprised the following: it was announced that three bp-led hydrogen and CCS projects in north-east England - Net Zero Teesside Power gas-fired power station and CCS, H2Teesside blue hydrogen* and HyGreen Teesside green hydrogen* - have been chosen by the UK government to go to the next stage of development; bp signed an agreement with Harbour Energy to take a 40% stake in the Viking carbon capture and storage (CCS) project in the North Sea; and bp launched plans for low-carbon green hydrogen cluster in Spain’s Valencia region. bp announced a successful bid in the Innovation and Targeted Oil and Gas (INTOG) Scottish offshore wind leasing round, bp’s first step in floating offshore wind; and bp and Deep Wind Offshore announced the formation of a joint venture to develop offshore wind opportunities in South Korea.

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gas & low carbon energy (continued)