BP on Wednesday flagged $4 billion to $5 billion in fourth-quarter impairments, largely tied to its energy transition businesses, as it also warned of weaker oil trading conditions.
The British oil major said the write-downs reflect a strategic shift under new leadership to reroute spending away from lower-carbon projects and back toward oil and gas to bolster profitability, as the company moves to simplify its portfolio.
BP added that the impairments would not affect its underlying replacement cost profit, its preferred measure of net income, and declined to disclose which specific projects were impacted.
The company expects fourth-quarter oil and gas production to be broadly flat at around 2.4 million barrels of oil equivalent per day, in line with output reported in the third quarter.
Lower oil prices and softer trading conditions are expected to weigh on earnings, with BP forecasting a $200 million to $400 million hit to oil business earnings and a further $100 million to $300 million impact on gas operations quarter on quarter.
Brent crude prices averaged about $63.73 a barrel in the October to December period, down from $69.13 in the previous quarter, as concerns over potential oversupply pressured markets.
BP also said its net debt is set to fall to between $22 billion and $23 billion by the end of the fourth quarter, down from $26.1 billion at the end of September, helped by asset sales.
The company reiterated its target to reduce net debt to between $14 billion and $18 billion by the end of 2027, supported by divestments expected to total around $5.3 billion in 2024, excluding proceeds from the sale of a majority stake in its Castrol lubricants business.