BP PLC has indicated it expects to record asset write-downs of up to $5 billion in the fourth quarter. This comes just weeks after the company appointed a new Chief Executive Officer, as it intensifies efforts to return to profitability.
The oil major stated in a release on Wednesday that the impairment charges are primarily linked to its gas and low-carbon businesses. The announcement was made ahead of next month's earnings report. The statement also noted that the company's oil trading performance is expected to be weak for a second consecutive quarter, oil production is projected to be flat, although net debt has decreased.
The abrupt departure of Murray Auchincloss previously caused market turbulence. Following years of setbacks in low-carbon investments and pressure from activist investor Elliott Investment Management, Auchincloss had steered the company's strategic focus back towards fossil fuels. However, the new Chairman, Albert Manifold, deemed the pace of strategic change insufficient and promptly appointed Meg O'Neill, CEO of Woodside Energy Group, to succeed Auchincloss.
The London-based oil giant is continuing to divest non-strategic assets, using the proceeds from sales to reduce its debt load. Meanwhile, in the current environment of lower oil prices, the combination of weak oil trading results and stagnant production increases pressure on the company to maintain its share buyback pace.
O'Neill is set to officially take up her role in April this year, by which time some foundational work for a performance turnaround will already be in place. BP PLC brought several oil fields online last year and, in December, reached an agreement with US investment firm Saddle Peak Capital to sell a majority stake in its Castrol lubricants division. This deal is a key step in the company's efforts to reduce debt and reshape its business portfolio.
Driven by these transformation initiatives, BP PLC's share price rose by 10% in US dollar terms last year. Among the world's five largest oil majors, its stock performance was nearly on par with Shell PLC, tying for the top position. The company's better-than-expected third-quarter earnings were largely attributable to growth in oil and gas production.
However, emerging signs of market oversupply have significantly increased downward pressure on oil prices, casting a shadow over the company's transition path. Although geopolitical risks provide some support for prices, even amid recent unrest in Venezuela and Iran, the international benchmark Brent crude price remains below the crucial $70 per barrel mark—a level seen as essential for BP to achieve its profitability turnaround goals.
Other oil majors, Shell and ExxonMobil, have already issued warnings, indicating that their fourth-quarter results will face significant challenges.
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