Here's a classic case of good news and bad news arriving in the same earnings report. BP p.l.c. (NYSE: BP) posted second-quarter numbers that blew past Wall Street's expectations, with profit more than doubling. But the energy giant also trimmed its production and spending outlook for the year, and investors responded by sending the stock down nearly 4% on Tuesday.

Let's start with the good stuff. BP reported adjusted earnings of $2.22 per American depository share, a massive jump from 90 cents in the same quarter last year. Revenue came in at $69.1 billion, up from $46.63 billion a year earlier and comfortably ahead of the $63.6 billion analysts had penciled in.

Profit attributable to shareholders climbed to $3.91 billion, compared with $1.63 billion in the prior-year quarter. Underlying replacement cost (RC) profit, which is the metric BP prefers to use, rose to $5.7 billion from $2.4 billion.

The company credited higher liquids and gas realizations, including the impact of price lags, stronger realized refining margins, and improved customer results for the sequential jump in underlying RC profit.

Cash flow was also robust. Operating cash flow totaled $10.9 billion, significantly higher than $6.3 billion a year ago. Capital expenditures were $3.1 billion, while divestments and other proceeds reached $609 million. Net debt stood at $22.3 billion at quarter-end.

Shareholders got a little something extra too. BP increased its second-quarter dividend by 4% year-over-year to 8.66 cents per share.

Segment Performance

Breaking down the numbers by segment, the oil production and operations unit reported RC profit before interest and tax of $3.4 billion, with underlying profit of $3.6 billion, up from $2.3 billion a year ago.

The gas and low carbon energy segment generated $1.6 billion in RC profit before interest and tax, with adjusted underlying profit of $2.1 billion compared to $1.5 billion in the year-ago quarter.

The customers and products segment posted RC profit before interest and tax of $5.1 billion, and underlying profit reached $5.0 billion, a big improvement from $1.5 billion a year earlier.

CEO Meg O'Neill acknowledged that operational performance was weaker during the quarter. Upstream plant reliability declined to 92.4% from 95.7% in the first quarter of 2026. Production and refinery throughput were hit by planned maintenance and Middle East disruptions, underscoring the need for more consistent operations.

O'Neill also highlighted ongoing efforts to strengthen the balance sheet and simplify the business. That includes the sale of the Gelsenkirchen refinery, an agreement to divest its Austrian retail business, plans to sell its UK North Sea business, and the proposed sale of Archaea, its U.S. biogas business.

Third-Quarter Guidance

Looking ahead, BP expects third-quarter upstream production of 2.10 million to 2.25 million barrels of oil equivalent per day (boe/d), compared with 2.201 million boe/d in the second quarter. It sees refinery throughput of 1.30 million to 1.36 million barrels per day and plans to repay $1 billion of hybrid debt.

The outlook reflects continued disruption in the Middle East, BP's reduced equity interest in Latin America, and an estimated impact of around 40 mboe/d from potential seasonal weather events in the Gulf of Mexico. The company also noted that heightened volatility in oil and gas prices could affect PSA contracts.

In the customers business, BP expects results to be significantly lower sequentially, owing to broadly flat volumes, weaker midstream performance, and lower Castrol earnings due to the delayed impact of higher base oil costs.

For the products segment, BP expects refinery throughput of 1,300 to 1,360 mb/d, reflecting the completion of the Gelsenkirchen divestment and reduced planned turnaround activity.

2026 Outlook

For the full year, BP lowered its upstream production outlook to 2.18 million to 2.27 million boe/d, compared with 2.312 million boe/d in 2025. The company now expects capital expenditure of $13.5 billion to $14.0 billion, along with $8 billion to $9 billion in divestment proceeds.

The production guidance revision reflects Middle East disruptions, the Culzean gas field divestment, reduced Latin America equity interest, and seasonal weather impacts in the Gulf of America. Underlying production is expected to remain broadly flat, with stable oil output offset by lower gas and low carbon energy production.

Fuel margins are expected to remain sensitive to Middle East developments. Products throughput is expected at 1,360 to 1,410 mb/d, owing to lower turnaround activity following the Gelsenkirchen divestment.

So, what's the takeaway? BP is raking in cash thanks to higher energy prices, but it's also facing operational headwinds that are forcing it to temper expectations for the rest of the year. The market seems to be focusing on the latter, at least for now.

BP Price Action: BP shares were down 3.90% at $42.53 at the time of publication on Tuesday.