KEY POINTS
- BP expects $4 billion to $5 billion in fourth-quarter impairments.
- Lower oil and gas prices are set to cut earnings sharply.
- Net debt is falling as divestments outpace guidance.
BP is preparing investors for a costly fourth quarter, signaling billions of dollars in write-downs linked to its energy transition push as the company pivots spending back toward oil and gas under a reshaped leadership team.
Energy transition write-downs mount
BP said it expects to book between $4 billion and $5 billion in impairments for the fourth quarter, largely tied to its energy transition businesses. The British oil major disclosed the estimate in a trading update released Wednesday ahead of full results scheduled for February 10. The impairments will be excluded from underlying replacement cost profit, BP’s preferred measure of net income.
The company declined to identify the specific projects affected, leaving investors to gauge the scale of the reset without further detail. The move reflects a broader rerouting of capital toward oil and gas assets as BP seeks to lift returns. That shift is being driven by new leadership, including Chair Albert Manifold, as the company reassesses the pace and economics of its transition strategy.
BP is also preparing for a change at the top. Meg O’Neill will take over as chief executive in April, replacing interim CEO Carol Howle. The transition follows the abrupt departure of Murray Auchincloss last month, adding to a period of strategic and managerial change for the group.
Prices and trading hit earnings
Beyond impairments, BP warned that weaker oil trading and lower commodity prices will weigh on fourth-quarter earnings. The company estimates that softer oil prices alone will cut quarterly earnings by $200 million to $400 million. Weaker gas prices are expected to reduce earnings by a further $100 million to $300 million.
European benchmark gas prices fell 9 percent during the quarter. Brent crude averaged $63.73 a barrel, down from $69.13 in the third quarter, as oversupply concerns pressured markets. BP shares fell 1.1 percent by 0841 GMT, compared with a 0.4 percent decline in a broader index of European energy companies.
BP said net debt likely fell to between $22 billion and $23 billion by the end of 2025, down from $26.1 billion in the third quarter. The drop was supported by divestments of about $5.3 billion, exceeding earlier guidance. The figure excludes $6 billion from the sale of a majority stake in Castrol. BP is targeting net debt of $14 billion to $18 billion by 2027.
Refining margins slipped to $15.20 a barrel from $15.80 previously. BP’s Whiting refinery in the U.S., which can process 440,000 barrels a day, suffered outages after an October fire, compounding earlier disruptions from flooding and a major 2024 outage, according to Reuters. BP also increased its expected 2025 tax rate to 42 per cent from 40 percent.
