On Tuesday, BP shares took a hit as the company announced that it expects to post an impairment of up to $2 billion in the second quarter. This news has led to a 2.6% drop in the company’s shares during early market trading in London.
BP cited weak refining margins and lower oil trading performance as the key factors behind the anticipated impairment in its second-quarter results. The company expects the hit to range between $500 million to $700 million, with additional charges related to asset impairments and contract provisions estimated to be between $1 billion to $2 billion.
The company also disclosed that upstream production in the second quarter is expected to be “broadly flat” compared to the previous quarter. BP attributes this stagnation to weaker margins in fuels, as well as lower gas and oil prices affecting its results.
BP is currently going through a period of transition with former CEO Bernard Looney stepping down after less than four years in the position. The resignation was reportedly due to undisclosed personal relationships with colleagues. Murray Auchincloss has since been appointed as the permanent CEO in January. The company is now focusing on achieving at least $2 billion in cash cost savings by the end of 2026 under new leadership.
It is worth noting that rival energy giant Shell also recently announced a similar impairment hit of up to $2 billion, primarily linked to its facilities in Singapore and Rotterdam. This indicates a larger trend within the industry, where companies are facing challenges due to weak refining margins and fluctuations in oil and gas prices.
BP’s anticipation of a significant impairment in its second-quarter results highlights the challenges faced by the company in the current market conditions. The impact on its shares and overall financial performance underscores the importance of effective cost-saving measures and strategic decision-making in navigating these turbulent times. As the energy sector continues to evolve, companies like BP will need to adapt and innovate to maintain their competitive edge and drive sustainable growth.