BP PLC issued a warning that its profit outlook for the fourth quarter of 2025 is set to weaken, impacted by soft realized prices for oil and gas products, underperformance in its trading business, and substantial impairment losses linked to the energy transition; simultaneously, the company emphasized that its balance sheet condition has significantly improved, thanks to asset sales. In a trading update released ahead of its February 10 earnings report, BP indicated that it expects upstream production volumes in the fourth quarter to be broadly in line with the previous quarter, with stable crude output offset by a decline in natural gas and low-carbon energy production. However, falling realized commodity prices in the two main upstream segments are anticipated to drag on underlying replacement cost profit. For the gas and low-carbon energy business, the decline in realized prices—driven by changes in global natural gas benchmarks outside of Henry Hub—is projected to reduce core profit by between $100 million and $300 million quarter-on-quarter. The performance of the gas marketing and trading segment is expected to be "average," contributing only a minimal offset to profits. The impact on the crude oil production and operations business is more pronounced, with lower realized prices forecast to cut profits by $200 million to $400 million, partly due to price-lag effects affecting output from the Gulf of Mexico and the UAE. The average Brent crude price for the quarter was $63.73 per barrel, down from $69.13 per barrel in the third quarter. Downstream business performance was mixed. BP stated that volumes in its customer-facing segment are expected to decline due to seasonal factors, while fuel margins are projected to remain largely flat. In the products business, improved realized refining margins contributed approximately $100 million in gains, but these benefits were offset by a high level of plant turnaround activity and temporary capacity loss at the Whiting refinery in the U.S. Midwest following a fire. Crude oil trading results are anticipated to be weak. The most significant factor affecting earnings, however, stems from impairment charges. BP expects to record post-tax adjustment charges of $4 billion to $5 billion in the fourth quarter, primarily related to energy transition-linked businesses and equity-accounted entities. These impairments will be excluded from the underlying replacement cost profit but underscore the considerable financial pressure facing parts of BP's low-carbon energy investment portfolio amid evolving market assumptions and the broader environment. Despite multiple pressures on profitability, BP's balance sheet has shown notable progress. Net debt is projected to fall to between $22 billion and $23 billion by the end of the fourth quarter, a significant decrease from $26.1 billion at the end of the third quarter. The reduction in debt levels was driven by approximately $3.5 billion in proceeds from asset disposals during the quarter, bringing the full-year total from asset sales to about $5.3 billion—well exceeding the previously set target of over $4 billion. Regarding full-year tax guidance, BP provided an update, expecting the underlying effective tax rate to rise to around 42%, up from the previous guidance of approximately 40%, mainly due to changes in the geographical mix of profits. This trading update highlights the strategic dilemma currently facing BP: the company must balance cash flow from its traditional oil and gas operations with a capital-intensive and increasingly volatile energy transition strategy. Although upstream production remains robust and asset disposals continue to strengthen the balance sheet, the weak trading environment and substantial impairment charges indicate that earnings volatility is likely to persist as BP reshapes its investment portfolio. BP will release its full fourth-quarter and annual results for 2025 on February 10, 2026.
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