BP's chief executive Meg O'Neill has described the North Sea as uncompetitive, just days after the British energy giant put its assets in the basin up for sale.

O'Neill, who took the helm as CEO in April, said she had spoken with Prime Minister Andy Burnham as she defended BP's decision to exit the North Sea entirely.

"When we look at how it fits into our portfolio today, it just doesn't compete for capital," O'Neill told CNBC.

The move leaves BP without any petrochemical production in its home market for the first time in decades. O'Neill's remarks also intensify pressure on the newly appointed Prime Minister Burnham to reconsider the oil and gas windfall tax, which has been a source of industry friction since its introduction. Several other operators have also scaled back North Sea commitments in recent years, citing the basin's declining production volumes and higher operating costs relative to newer provinces.

US Biogas Business on the Block

Speaking alongside the company's latest financial results, O'Neill confirmed that BP will also divest its US biogas business as part of a strategic pivot back toward core oil and gas operations.

The London-listed major had previously informed investors of plans to market assets across its operating regions under a broader restructuring led by O'Neill.

BP acquired the biogas firm Archaea for $4.1bn in 2022, a deal struck under BP's previous strategy to build a substantial renewable and low-carbon portfolio. The business has since suffered financial underperformance and slower-than-expected growth, prompting the FTSE 100 company to reassess the asset's value and marking one of the clearest reversals of that earlier strategy.

O'Neill said the company must streamline its portfolio "based on value, not sentiment, nor history," concentrating instead on assets that "deliver competitive returns and long-term value."

She had earlier unveiled plans for a sweeping reorganisation of BP's energy operations, dividing the group into two divisions — upstream and downstream — with a sole focus on profitable assets. The restructuring has already included the sale of BP's Gelsenkirchen refinery and its retail business in Austria.

"We are not making the most of our potential. Our performance over the past few years has not met our own expectations, let alone those of our shareholders," O'Neill said.

"We have not delivered consistently; we have written off too much value; and our costs and liabilities are not resilient enough in a low price environment."

Shares rose 1.2 per cent in early trading to 559.1p. The stock has gained 27.6 per cent since the beginning of the year.

Middle East Conflict Drives Profit Surge

BP's profits jumped sharply in the second quarter as the group continued to benefit from oil price volatility driven by the conflict in the Middle East.

The company reported a profit increase to $5.7bn (£4.2bn), a $2.5bn rise from the prior period, exceeding analyst forecasts of $5.1bn.

Its gas and low carbon energy division posted profits of $1.6bn, up from $1.1bn in the previous quarter. Oil production and operations saw profit climb to $3.4bn from $1.7bn.

Mark Crouch, market analyst at eToro, said: "Having retreated from its previous push into renewables, BP is accelerating asset sales, simplifying the business and directing more capital towards higher-return oil and gas operations."

"If tensions across the Middle East persist or escalate further, energy prices could remain elevated, providing an additional tailwind for the sector. The key question for investors is whether BP can use this favourable backdrop to create lasting shareholder value long after today's geopolitical uncertainty eventually fades."

Production Guidance Lowered

BP expects third-quarter production to range from 2,100 to 2,250 thousand barrels of oil equivalent per day (mboe/d), compared with 2,201 mboe/d in the second quarter.

As a result, the group has lowered its full-year upstream production guidance to 2,180–2,270 mboe/d, down from last year's 2,312 mboe/d.

BP attributed the revised outlook to "continued disruption in the Middle East" and the potential for "weather events in the Gulf of America."

The company also expects income taxes paid in the quarter to be approximately $1bn higher, "mainly due to timing effects."

O'Neill said: "We need to take a clear look at ourselves: assessing what needs to change, stopping what holds us back and building strength where it matters. We have to get fit to grow."