BP (LON:BP) predicts significant impairment charges between $1 billion and $2 billion for the fourth quarter of 2024. This announcement has negatively impacted its London-listed share prices. The oil and gas giant also foresees a reduction in upstream production, raising further concerns among investors.

Detailed Breakdown of Impairment Charges

BP will distribute the non-cash, post-tax impairment charges across its various business segments. These charges stem from the company’s need to reassess multiple assets given the current market challenges affecting the oil and gas sector. Consequently, analysts are revising BP’s fourth-quarter earnings expectations downward, dampening the firm’s financial outlook.

Predicted Drop in Upstream Production

Alongside these impairment charges, BP foresees a downturn in upstream production for the fourth quarter encompassing both oil and gas. Despite these setbacks, BP’s low-carbon energy segment is expected to benefit from rising natural gas market prices, potentially offsetting some negative impacts on overall production levels.

This anticipated drop in production is troubling for BP, as lower output typically correlates with reduced revenue.

Increased Corporate Costs and Impact of Currency Fluctuations

BP has also increased its projection for corporate costs throughout 2024. The latest forecast predicts underlying annual charges reaching $600 million, up from an earlier estimate of $300 million to $400 million. This rising financial burden is largely due to foreign exchange losses, which are influenced by shifts in global currency values.

Analysts Respond with Revisions

Post-announcement, RBC Capital Markets downgraded its forecasts for BP’s fourth-quarter net income to approximately $1.63 billion, a reduction from the prior estimate of $1.89 billion. Analysts cited the impact of increased corporate costs and lower refining margins as key variables affecting these revised earnings projections.

Jefferies also highlighted potential downside risks concerning BP’s earnings, noting revisions in revenue expectations related to customers and product lines.

Rescheduling of Capital Markets Day

In light of the financial updates, BP has postponed its Capital Markets Day, originally set for February 11 in New York. It will now occur on February 26 in London, following a medical procedure undergone by CEO Murray Auchincloss, who is expected back in the office in February.

Conclusion: BP’s Financial Landscape Amid Challenges

BP’s latest update for the fourth quarter underscores ongoing difficulties within the oil and gas industry. Key concerns include impairment charges, lower upstream production figures, and rising corporate costs. Still, there is hope for growth within the low-carbon energy segment given the favorable conditions of natural gas pricing.

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