Oil major bp expects to book $4 billion to $5 billion in fourth-quarter impairments, mainly tied to its low-carbon energy businesses, as it redirects spending to oil and gas to boost returns under new leadership, including Chair Albert Manifold.
The British company said in a trading statement ahead of results on February 10 that the impairments are excluded from underlying replacement cost profit, its version of net income. A spokesperson declined to say which projects were affected.
bp's low-carbon portfolio also includes U.S. biogas producer Archaea, which bp bought in 2022 for $4.1 billion. Citi analysts said they suspected impairments might be linked to this unit.
After taking a $24 billion hit from exiting Russia in 2022, bp - with a current market capitalisation of around $91 billion - recorded impairments of $5.7 billion in 2023, $5.1 billion in 2024 and has flagged around $6.9 billion for last year, according to its releases and Reuters calculations.
'CLEARING THE DECKS'
The company slashed its annual spending on energy transition businesses about a year ago from $7 billion to a maximum of $2 billion as it embarked on a major strategy shift back to oil and gas.
It has also had leadership changes with Meg O'Neill set to replace interim CEO Carol Howle in April after Murray Auchincloss's abrupt exit last month.
"We see this as a first step in new management 'clearing the decks', with the next logical step being to cut the buyback to zero and allow for further de-leveraging in a weaker macro environment," said RBC analyst Biraj Borkhataria.
bp is buying back around $750 million worth of shares every quarter.
bp CUTS BACK ON ENERGY TRANSITION
It wants to sell its stake in solar power group Lightsource bp, has spun off its offshore wind business into joint venture JERA Nex bp and has abandoned plans to build a biofuels plant in Amsterdam and hydrogen plants in Australia and Britain.
Jera Nex bp was not among winners at a British offshore wind power contract auction on Wednesday after having committed hundreds of millions of dollars in 2021 with German regional utility EnBW to UK seabed rights. Jera Nex BP declined to comment.
bp warned in its outlook that weaker oil trading and falling prices will weigh on fourth-quarter earnings.
It expects lower oil prices to reduce quarterly earnings by $200 million to $400 million while weaker gas prices could trim another $100 million to $300 million. European benchmark gas prices fell 9% in the period, and Brent crude < averaged $63.73 a barrel, down from $69.13 in the third quarter, as oversupply fears hit markets.
BP shares were down 0.7% by 1112 GMT versus a 0.2% dip in a broader index of European energy companies.
NET DEBT FALLING DUE TO DIVESTMENTS
bp expects net debt to have dropped to $22 billion–$23 billion by the end of 2025 from $26.1 billion in the third quarter, helped by divestments of about $5.3 billion, above earlier guidance. The figure excludes $6 billion from selling a majority stake in its Castrol lubricants unit. BP aims to cut debt to $14 billion–$18 billion by 2027.
Refining margins slipped to $15.20 a barrel from $15.80 in the previous quarter. BP’s 440,000-barrel-per-day Whiting refinery in the U.S. suffered outages after an October fire, adding to earlier disruptions from flooding and a major 2024 outage.
