Energy reset: The BP logo at a petrol station. BP is buying back around US$750mil worth of shares every quarter. — AFP
LONDON: Oil major BP expects to book US$4bil to US$5bil 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 chairman Albert Manifold.
The British company said in a trading statement on Wednesday ahead of results on Feb 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 US biogas producer Archaea which BP bought in 2022 for US$4.1bil.
Citi analysts said they suspected impairments might be linked to this unit.
After taking a US$24bil hit from exiting Russia in 2022, BP – with a current market capitalisation of around US$91bil – recorded impairments of US$5.7bil in 2023, US$5.1bil in 2024 and has flagged around US$6.9bil for last year, according to its releases and Reuters calculations.
The company slashed its annual spending on energy transition businesses about a year ago from US$7bil to a maximum of US$2bil 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 chief executive officer 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 deleveraging in a weaker macro environment,” said RBC analyst Biraj Borkhataria.
BP is buying back around US$750mil worth of shares every quarter.
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 the 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 on Wednesday that weaker oil trading and falling prices will weigh on fourth-quarter earnings.
It expects lower oil prices to reduce quarterly earnings by US$200mil to US$400mil while weaker gas prices could trim another US$100mil to US$300mil.
European benchmark gas prices fell 9% in the period, and Brent crude averaged US$63.73 a barrel, down from US$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.
BP expects net debt to have dropped to US$22bil to US$23bil by the end of 2025 from US$26.1bil in the third quarter, helped by divestments of about US$5.3bil, above earlier guidance.
The figure excludes US$6bil from selling a majority stake in its Castrol lubricants unit.
BP aims to cut debt to US$14bil to US$18bil by 2027.
Refining margins slipped to US$15.20 a barrel from US$15.80 in the previous quarter.
BP’s 440,000-barrel-per-day Whiting refinery in the United States suffered outages after an October fire, adding to earlier disruptions from flooding and a major 2024 outage. — Reuters
