9th Jul 2024 10:15
(Alliance News) - BP PLC shares fell after the oil major said it will book an up to USD2 billion impairment in its second-quarter, and flagged lower refining margins.
The stock traded 3.4% lower at 458.45 pence each in London on Tuesday morning, the worst blue-chip performer.
BP said it expects second-quarter results to be hit by "post tax asset impairments and one-off contract provisions of between USD1 billion and USD2 billion".
This includes the impact of the scaling back of refining operations at the Gelsenkirchen refinery in Germany from 2025, due to high costs and declining demand for fuels.
In the customers segment, compared to the prior quarter, BP forecast stronger fuels margins and convenience store performance, and seasonally higher volumes.
But in the products unit, significantly lower realized refining margins, are expected to have an adverse impact in the range of USD500 million to USD700 million.
This mainly reflects weaker middle distillate margins and narrower North American heavy crude oil differentials, and a higher level of turnaround activity. This will be partially offset by the absence of the first-quarter Whiting refinery outage of around USD500 million, BP noted.
XTB analyst Kathleen Brooks commented: "While hydrocarbons are still going to be an important part of the fuel mix for the foreseeable, there is no doubt that oil companies and refiners will see volatility in their results going forward, as demand for traditional fuels fall as renewables grow in popularity."
The oil trading result is expected to be "weak" following a strong result in the first quarter, the company added.
In the oil production & operations segment, realizations, compared to the prior quarter, are expected to have a favourable impact in the range of USD100 million to USD300 million, including the impact of price lags on BP's production in the Gulf of Mexico and the United Arab Emirates.
In the gas & low carbon energy segment, realizations, compared to the prior quarter, are expected to have a negative impact of around USD100 million, including declines in non-Henry Hub natural gas marker prices.
The gas marketing and trading result is expected to be average following a strong result in the first quarter.
Upstream production in the second quarter is now expected to be largely in line with the prior quarter, with production broadly flat in oil production & operations and slightly lower in gas & low carbon energy.
Hargreaves Lansdown analyst Matt Britzman commented: "BP's second-quarter update revealed that upstream production is now likely to be broadly flat compared to the first quarter, an improvement over the slight fall expected in previous guidance. But BP's integrated model means there are a lot of moving parts, and they haven't all been pointing in the same direction.
"Higher margins at the pump have been tempered by weaker selling prices for some refined products in the customer segment. There shouldn't be too much change, if any, to analyst expectations off the back of this statement. BP's focus has been a little scattergun of late, but it's likely to remain an important part of the energy mix for some time to come. It still has one eye on the energy transition, and there appears to be little downward pressure on the oil price in the immediate future. This should keep both cash flow and generous distributions to investors flowing."
By Eric Cunha, Alliance News news editor
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