(Jan 14): BP plc said it expects to take as much as US$5 billion in writedowns for the fourth quarter, just weeks after replacing its CEO as it strives to turn around its fortunes.
The oil giant foresees impairment charges mostly related to its gas and low-carbon business, BP said in a statement on Wednesday (Jan 14), ahead of an earnings report next month. Oil trading results are “expected to be weak” for a second straight quarter and production will be “flat” while net debt was reduced.
The report follows the shock ouster of Murray Auchincloss, who had set in motion a push to refocus the business on fossil fuels after years of failed low-carbon bets and pressure from activist shareholder Elliott Investment Management. New chairman Albert Manifold said changes weren’t happening fast enough and named Woodside Energy Group Ltd CEO Meg O’Neill to replace him.
The London-based oil major is divesting non-strategic assets, with the sales helping bring down debt. Meanwhile, the weak oil trading results and flat production in a lower oil price environment will add more pressure to BP’s ability to maintain its pace of share repurchases.
O’Neill will take over in April with some of the groundwork to turn the company around laid out for her. BP announced a spate of field startups last year and in December the company agreed to sell a majority stake in its Castrol lubricants division to US investment firm Stonepeak Partners, a crucial step in its efforts to reduce debt and reset the business.
The turnaround push helped BP’s shares to almost tie with Shell plc as the best performer among the top five oil majors last year in dollar terms, with a 10% gain. Third-quarter earnings beat expectations largely thanks to rising oil and gas output.
But the reversal is now under the threat of lower oil prices as the market seems headed to oversupply, though geopolitical risks have offered some price support. Even with the recent turmoil in Venezuela and Iran, international benchmark Brent crude has traded below the US$70-a-barrel level that BP needs in order to achieve its turnaround targets.
Both Shell and Exxon Mobil Corp have signalled a tougher fourth quarter.
Uploaded by Arion Yeow
