BP reported its highest quarterly underlying profit on record on Friday, benefiting from higher oil prices and stronger refining margins linked to the Iran war, as the British energy company moved to settle its remaining financial liabilities from the 2010 Deepwater Horizon disaster.
The company reported third-quarter underlying replacement cost profit of $8.46 billion, its measure of adjusted net income, substantially above analysts’ expectations of $7.33 billion. The result compared with $2.2 billion in the same period last year and marked the strongest quarterly performance under BP’s current reporting measure.
The earnings surge followed similarly strong results from Shell and TotalEnergies, which also exceeded market expectations on Thursday. Both companies opted to increase shareholder returns through higher share buybacks, while BP indicated that reducing debt and addressing its outstanding obligations would take priority over expanding distributions to investors.
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BP said it would use part of the additional cash generated during the quarter to settle its remaining liabilities associated with the Deepwater Horizon oil spill, one of the worst environmental disasters in the history of the US oil industry.
The 2010 disaster occurred after a blowout on the drilling rig operating at BP’s Macondo well in the Gulf of Mexico. Eleven workers were killed, and the incident triggered extensive environmental damage, legal proceedings, and compensation obligations for the company.
BP initially set aside approximately $69 billion in connection with the disaster. Its remaining related payables and provisions stood at $5.94 billion, according to the company’s latest disclosures and a BP spokesperson, with payments scheduled to continue through 2033.
The decision to address these liabilities comes as BP generates stronger cash flows from its oil and gas operations, giving the company greater capacity to reduce financial obligations accumulated over more than a decade.
Strong Cash Flow Allows BP to Reach Debt Target Early
BP generated operating cash flow of $14.8 billion during the third quarter, while net debt declined to $13.9 billion. The reduction allowed the company to reach its net debt target a year ahead of schedule.
The milestone strengthens BP’s financial position following a difficult period in which the company faced pressure over its investment strategy, capital allocation and ability to compete with rivals benefiting from sustained demand for oil and gas.
Chief Executive Meg O’Neill said BP had maintained oil and gas production at approximately 2.2 million barrels per day during the quarter. Upstream plant reliability and refinery availability also improved compared with the previous three months, while trading performance increased.
“This has generated a strong set of results, supported by the higher-price, higher-margin environment and some good progress on performance improvement across the business,” O’Neill said.
Despite the improved balance sheet, BP does not appear ready to accelerate shareholder distributions. Asked whether the company might resume share buybacks or increase its dividend, O’Neill said BP continued to carry more debt than it could comfortably manage under a low oil-price scenario.
The company is therefore prioritizing further debt reduction to protect its existing dividend.
That approach contrasts with Shell and TotalEnergies, which used their latest earnings announcements to increase buybacks. BP’s decision suggests management is placing greater emphasis on financial resilience and clearing outstanding liabilities before committing additional cash to shareholders.
BP shares rose 0.5% at around 1013 GMT on Friday, outperforming a 0.2% decline in the broader European energy sector. The company’s shares had reached their highest level this month since before the Deepwater Horizon disaster.
The improvement also marks another stage in BP’s strategic turnaround. In 2025, the company reset its direction after an earlier push into renewable energy failed to deliver the expected financial performance, shifting greater attention back towards its oil and gas operations.
Refining Margins and Trading Deliver Gains Across BP’s Businesses
The improvement in BP’s quarterly earnings extended across all three of its business units, each of which performed better than analysts had expected.
The company’s refining indicator margin increased to $46.70 per barrel from $29.60 in the second quarter and $15.80 a year earlier. Higher oil prices and stronger margins in refined products helped lift profitability, while BP also reported a significantly stronger result from gas marketing and trading.
The increase in refining margins underpins how geopolitical disruption can benefit integrated energy companies through more than higher crude prices. Changes in crude supply, product availability and regional trade flows can widen the difference between the cost of crude oil and the prices of refined fuels.
The Iran war has disrupted energy supply routes and heightened uncertainty across global oil markets, contributing to the higher-price and higher-margin environment cited by BP. However, the extent to which these conditions persist lies on developments in the conflict and the ability of producers and refiners to adjust supply.
BP’s performance also comes with substantial costs from its previous investments in low-carbon businesses. The company recorded approximately $4 billion in impairments during the quarter, largely associated with its solar business Lightsource BP and offshore wind operations.
The latest charges add to more than $5 billion in write-downs recorded in recent months, mainly involving biogas business Archaea, Lightsource BP and other low-carbon ventures.
These impairments highlight the financial consequences of BP’s earlier diversification strategy and the reassessment of the commercial value of some renewable energy investments. They also reinforce the company’s shift towards businesses it believes can generate stronger returns and cash flow.
The company is scheduled to provide a long-term strategy update on December 15, when investors will look for greater clarity on its investment priorities, production plans and approach to shareholder returns.
O’Neill Rejects Claims of Possible BP Breakup
Alongside the earnings announcement, O’Neill rejected reports that BP’s board had discussed breaking up the company.
Her comments followed a report by Semafor, citing unnamed sources, that some board members favored splitting the British energy group. BP had previously denied the report.
Speaking during a conference call on the quarterly results, O’Neill said there had been no conversations about a breakup. She added that discussions with the board about the company’s strategic direction had reaffirmed the importance of maintaining an integrated oil and gas business.
That structure combines upstream operations, which involve exploration and production, with downstream activities such as refining and marketing. BP’s position is that keeping both businesses under one corporate structure remains central to its strategy.
The integrated model can provide a degree of protection against volatility across the energy value chain. Higher crude prices can benefit production operations, while refining and trading can generate earnings from different market conditions. However, the model also requires substantial capital allocation across businesses with different investment needs and risk profiles.
BP’s record quarterly profit gives O’Neill greater financial room to pursue the company’s revised strategy, but the immediate priorities remain debt reduction, liability settlement, and operational performance. The $5.94 billion in outstanding Deepwater Horizon provisions remains a significant obligation, even as BP moves towards clearing it ahead of the existing payment schedule.