BP flags up to $5 billion in energy transition impairments, weak oil trading

BP expects to book $4 billion to $5 billion in impairments in the fourth quarter, mainly related to its energy ‌transition businesses, it ‌said on Wednesday, while flagging weak oil trading.

The company is rerouting spending from lower-carbon businesses to oil and gas in ‌a bid to improve profitability under the new leadership of Chair Albert Manifold, who has said BP's portfolio needed to be simplified.

New CEO Meg O'Neill will replace interim chief Carol Howle in April after Murray Auchincloss's abrupt exit last month.


BP said in its Wednesday trading statement the ​impairments would not impact underlying replacement cost profit, its version of ​net income. A spokesperson declined to give further details on which projects the impairments ‌related to.

The ‍company expects its oil and gas output in the fourth quarter to ‍be broadly flat compared with the 2.4 million barrels of oil ‌equivalent per day reported in the third quarter, in line with previous expectations.

LOWER OIL PRICES, TRADING WEIGH ON EARNINGS

BP said it expected weaker realisations, or the money it receives for its products, in its oil business to shave off $200 million to $400 million in the last quarter from the previous quarter's earnings.

It said lower realisations are likely going to hit its gas business in a range of $100 million to $300 million in ‍the same period.

Global benchmark Brent crude prices averaged around $63.73 a barrel during the October to December quarter, compared with $69.13 in the third quarter, BP ‍said.

Crude oil prices ⁠fell in the fourth ⁠quarter as investors worried that the market would soon become oversupplied.

NET DEBT FALLING DUE TO DIVESTMENTS

BP expects net debt at the end of the fourth quarter to come in at between $22 billion and $23 billion, down from $26.1 billion at the end of the third quarter. It has pledged to bring net debt down to $14 billion to $18 billion by the end of 2027.

Full-year divestments are set to reach roughly $5.3 billion, compared with prior guidance of more than $4 billion. This does not include $6 billion from selling a majority stake in its lubricants business Castrol.