A trading update ahead of next week's results shows BP slashing debt even as it books hefty impairments on its retreating green energy push.
BP (LSE: BP.) has told investors to expect a sharp reduction in net debt and a strong uplift from refining in the third quarter, even as the oil major prepares to book up to $4.5bn of impairments tied mainly to its low-carbon businesses. In a trading statement issued ahead of full results on 30 October, BP said net debt is expected to fall to between $13.5bn and $14.5bn by the end of September, down from $22.3bn three months earlier, a drop of roughly $8bn helped by asset disposals. Including hybrid bonds, leases and other liabilities, total debt-like reductions are expected to reach $9bn-$10bn.
The update reflects a split quarter: lower oil prices dented upstream earnings, with Brent averaging around $97 a barrel versus roughly $104 previously, but refining margins jumped on the back of Middle East supply disruption, adding an expected $1.9bn-$2.1bn to the products business. Gas trading was also strong, though the customer-facing fuels arm was squeezed by thinner forecourt margins, tempering some of the refining windfall.
The impairments, flagged at $3bn-$4.5bn post-tax, fall largely within BP's gas and low-carbon energy division, underscoring the company's retreat from earlier green targets as it reorients back towards core oil and gas production. Analysts noted the quarter's strength owed more to external market conditions than to any improvement in BP's own output, with production broadly flat year-on-year.
Alex Pugh, analyst at Freetrade, said BP had effectively 'made its money being a very good refinery' this quarter, but warned the windfall from Middle East-driven refining margins could prove short-lived if regional tensions ease.
Investors are now looking ahead to a comprehensive strategy update due in December, which should clarify BP's capital allocation and green transition plans. With shares trading near 600p after a 36% year-to-date rally, and political pressure in the US aimed at pushing oil prices lower, the final stretch of the year may prove tougher than the one just gone.
This report is based on BP’s announcement and coverage by UK Investor Magazine. Company announcements can be tracked via London Stock Exchange RNS and Investegate, and the full results calendar is worth watching for the next update.
This article is for general information only and does not constitute investment advice or a recommendation to buy or sell any security. Photo: Maksym Kaharlytskyi on Unsplash.
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