BP expects $2 billion impairment charges leading to near $3 billion hit, shares fall 3%
- BP anticipates impairment charges of up to $2 billion in Q2, causing a near $3 billion hit to the company.
- Shares drop by 3% following the news of weaker refining margins and expected writedown on a German plant.
- The outlook is challenging for BP due to financial setbacks and lower refining margins.
In recent news, British multinational oil and gas company BP is bracing for a significant financial blow in its upcoming quarterly results. The company is expected to incur a loss of nearly $3 billion due to decreased demand for fuels, particularly impacting its oil refining business. BP has cautioned investors about the potential impact of "significantly lower realised refining margins," estimating a hit of $500 million to $700 million on its earnings for the quarter. Additionally, BP anticipates a $2 billion writedown as part of its plan to reduce refining operations at its Gelsenkirchen refinery in Germany by a third in response to weakened demand. The oil giant's update also highlighted challenges in its oil trading business, expected to be weak, while gas trading is forecasted to be average. This announcement led to a decline in BP's shares by over 3.5% on Tuesday, reaching 457.76p per share. Former BP chief executive Bernard Looney, who was ousted last year for failing to disclose relationships with colleagues, has reportedly been seeking private equity investment for a new oil venture, meeting with key figures in the United Arab Emirates. Similarly, Shell, another major player in the energy sector, is projected to face an impairment charge of up to $2 billion in its upcoming financial results. The company's decision to halt work on a sustainable aviation fuel project in Rotterdam and sell a Singapore refinery has contributed to this financial outlook. Shell intends to shift focus towards its gas business, with plans to develop a gas field east of Trinidad and Tobago. The energy sector as a whole has faced challenges, with RBC analyst Biraj Borkhataria noting a modest underperformance but highlighting some positive aspects such as stronger upstream volumes. As BP navigates through this period of financial strain and transition, with a new CEO appointed earlier this year, the company aims to achieve significant cost savings by 2026. Weaker margins in fuels and fluctuating oil and gas prices have impacted BP's profitability in recent quarters, underscoring the challenges faced by major players in the energy industry amidst evolving market conditions. The company's upcoming financial results are eagerly awaited by investors and analysts for insights into its performance and strategic direction moving forward.