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BP Faces $5B Hit as Green Energy Shift Triggers Massive Impairments

BP anticipates taking a massive $4 to $5 billion impairment charge in the fourth quarter, primarily linked to its energy transition businesses. This comes as the oil major strategically reallocates capital away from lower-carbon ventures and back towards its core oil and gas operations. While underlying profit won't be affected, the company expects weaker realisations to dent its gas and oil earnings. The results will also be shaped by stronger refining margins, offset by operational disruptions like a refinery fire.

Key Points: BP's $5B Green Energy Impairment Signals Strategy Pivot

  • $4-5B Q4 impairments
  • Pivot from low-carbon ventures
  • Oil & gas production flat
  • Weaker gas & oil realisations
  • Refining margins offset by outages
2 min read

BP to witness $4-5 billion of impairments due to energy transition businesses

BP expects $4-5B in Q4 impairments from its energy transition businesses, as it reallocates capital back to oil and gas.

"The fourth quarter results are expected to include post-tax adjusting items... in the range of $4 to 5 billion, primarily related to our transition businesses. - BP Release"

New Delhi, Jan 14

British oil major BP said on Wednesday that it expects to see $4 billion to $5 billion of impairments in the fourth quarter, largely tied to its energy‑transition businesses, as the oil major pivots spending back to oil and gas.

The announcement follows a strategic reallocation of capital away from lower‑carbon ventures, under Chair Albert Manifold as BP seeks to simplify its portfolio. Meg O'Neill will take over as chief executive officer in April, replacing interim boss Carol Howle, following the abrupt exit of Murray Auchincloss last month.

The company said the impairments would not affect underlying replacement cost profit, its version of net income, though it did not identify specific projects.

"The fourth quarter results are expected to include post-tax adjusting items relating to impairments, including impairments within our equity-accounted entities, in the range of $4 to 5 billion, primarily related to our transition businesses. These charges are primarily attributable to the gas and low carbon energy segment and are excluded from underlying replacement cost profit," the release said.

BP said oil and gas production in the fourth quarter was broadly flat compared to the third quarter's 2.4 million barrels of oil equivalent per day, in line with prior expectations. However, weaker realisations are expected to dent its gas business with oil likely to reduce previous quarter's earnings by $200 million to $400 million, and gas by $100 million to $300 milion.

The quarterly results will be impacted "by stronger realised refining margins of around $0.1 billion, offset by a higher impact from turnaround activity and the temporary impact of reduced capacity following a fire at the Whiting refinery. The oil trading result is expected to be weak," the company flagged.

Global benchmark Brent crude prices averaged around $63.73 a barrel during the October to December quarter, compared with $69.13 in the third quarter, the release ‍said.

- IANS

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Reader Comments

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Sarah B
Interesting to see a major player like BP recalibrate. The financial reality of the energy transition is hitting hard. For a country like India, which is investing heavily in solar and wind, this news is a sobering reminder that the shift is complex and capital-intensive. Hope our policymakers are taking note.
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Arjun K
$4-5 billion is a staggering loss. While they say it doesn't affect underlying profit, it's still shareholder money. This pivot back to oil & gas feels like a step backwards. In India, we need stable policies to give confidence to companies investing in green energy, so they don't get cold feet like BP.
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Priya S
The timing with the leadership change is suspicious, no? New CEO comes in, writes off billions in "transition businesses". Sounds like they're cleaning house before the new boss takes charge. Hope Indian PSUs like ONGC are learning from these global maneuvers as they also navigate this shift.
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Karthik V
With crude prices averaging lower, maybe their return to oil isn't a guaranteed win either. This whole situation shows the volatility of the energy sector. For us in India, it reinforces the need for energy independence through a diverse mix – solar, wind, nuclear, and yes, some domestic oil & gas.
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Michael C
A respectful criticism: While I understand the financial pressure, BP's move sends a terrible signal. It makes it harder for smaller companies and nations committed to the transition to secure investment. Leadership means sticking to tough commitments, not retreating when the first big loss appears.

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