Key facts
- BP expects strong second-quarter earnings driven by higher oil and gas prices, oil trading, and refining margins.
- The company anticipates approximately $1 billion in impairments, mainly affecting its lower-carbon businesses.
- Upstream production is projected to decrease in the second quarter.
- Net debt is expected to fall to between $22 billion and $23 billion.
- Exploration write-offs are estimated at around $500 million.
BP anticipates a strong second quarter, with earnings expected to be lifted by higher oil and gas prices, robust oil trading, and improved refining margins. The British energy major stated that the energy price rally, sparked by the conflict involving Iran and disruptions to the Strait of Hormuz, is expected to provide a significant financial benefit.
Specifically, BP projects that stronger prices will add between $1.8 billion and $2.1 billion to its oil production and operations business earnings compared to the first quarter. The gas and low-carbon energy segment is also expected to see a benefit of $500 million to $700 million. Furthermore, stronger refining margins are anticipated to boost the products business by $1.2 billion to $1.4 billion, while oil trading results are expected to be slightly higher than the previous quarter's strong performance.
Despite these positive financial indicators, BP also flagged that its second-quarter results will include approximately $1 billion in impairments, primarily related to its lower-carbon energy transition businesses. Analysts from RBC suggested that LightsourceBP and Archaea could be facing divestment as part of these impairments.
Global benchmark Brent crude prices averaged around $97 per barrel in the second quarter, a notable increase from the first quarter and the previous year. However, BP expects its upstream production to fall to between 2.17 million and 2.22 million barrels of oil equivalent per day, partly due to the ongoing crisis. The company's net debt stood at $22 billion to $23 billion at the end of June, a decrease from $25.3 billion at the end of March. BP also made a $2.9 billion payment to redeem hybrid bonds and settled $1.1 billion in Gulf of Mexico liabilities.
Additionally, BP anticipates exploration write-offs totaling around $500 million, largely due to the sale of its stake in the Bay du Nord project offshore Canada.