Energy
Tuesday, July 9th, 2024 8:07 am EDT
Key Points
- BP shares dropped by 2.6% in early trading after announcing it expects to report a second-quarter impairment of up to $2 billion, primarily due to lower refining margins and weak oil trading performance.
- The company anticipates the impairment impacting its results will range between $500 million to $700 million, alongside additional post-tax asset impairments and contract provisions estimated at $1 billion to $2 billion, including costs related to reviewing its Gelsenkirchen refinery in Germany.
- BP’s upstream production for the second quarter is projected to remain relatively unchanged compared to the previous quarter, with an average gas marketing and trading result expected. The company is undergoing a leadership transition following the resignation of former CEO Bernard Looney and aims to achieve $2 billion in cash cost savings by 2026 amidst challenges from lower margins in fuels and reduced gas and oil prices affecting its first-quarter profits.
BP shares fell 2.6% in early trading on Tuesday after the company announced it expects to post an impairment of up to $2 billion in the second quarter and warned of lower refining margins impacting its results. The energy firm anticipates weak refining margins and oil trading performance will significantly affect its second-quarter results, due out on July 30, with an estimated hit of between $500 million to $700 million. Additionally, BP expects to record post-tax asset impairments and contract provisions ranging from $1 billion to $2 billion, which include charges related to an ongoing review of its Gelsenkirchen refinery in Germany.
Despite these challenges, BP noted that upstream production in the second quarter is expected to remain “broadly flat” compared to the previous quarter, and it anticipates an average gas marketing and trading result. The company is in a period of transition following the resignation of former CEO Bernard Looney due to undisclosed personal relationships with colleagues. Murray Auchincloss was appointed as the permanent CEO in January. BP aims to achieve at least $2 billion in cash cost savings by the end of 2026. Weaker margins in fuels and lower gas and oil prices had already impacted BP’s results in the first quarter, leading to a drop in profit.
The announcement follows a similar statement from rival energy giant Shell, which last week said it expects to record a post-tax impairment hit of up to $2 billion, mainly linked to its Singapore and Rotterdam plants. Shell also indicated that its second-quarter performance in trading and optimization within its core gas division is expected to be lower than the first quarter of 2024 due to seasonality.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/07/09/bp-expects-up-to-2-billion-impairment-in-2q-on-weak-refining-margins.html
