BP to Book Up to $2 Billion Impairment, Warns of Lower Refining Margins — 2nd Update

By Christian Moess Laursen

BP expects to book an impairment of up to $2 billion for the second quarter, and warned that its oil-trading earnings will take a hit of up to $700 million from lower refining margins.

The British energy major said Tuesday that it expects its second-quarter results to be hit by after-tax asset impairments and one-off contract provisions of between $1 billion and $2 billion, including charges relating to a review of its Gelsenkirchen refinery in Germany.

BP said in March that it planned to close a third of the crude-processing refinery's 265,000-barrels-a-day capacity due to a weakened demand outlook. The London-based company also took a $1.34 billion impairment related to the refinery last year due to a change in the economic outlook, it said in its annual report.

The company expects its customers and products segment oil trading result to weaken from the previous quarter as it takes a $500 million to $700 million hit from significantly lower realized refining margins. The division booked $1.29 billion in underlying replacement-cost profit before interest and tax in the first quarter.

The warning echoes a similar message from BP's U.S. peer Exxon Mobil on Monday, when it said lower refining margins across the industry would hurt its second-quarter profits.

BP's refining margins were mainly harmed by weaker middle distillates margins and narrower North American heavy crude-oil differentials, it said.

Meanwhile, its gas marketing and trading is expected to be average, it said. In the first quarter, BP reported $1.66 billion in the gas and low-carbon energy division.

Quarterly upstream production--the extraction of crude oil and natural gas--is expected to be broadly flat on the first quarter, when it produced 2.38 million barrels of oil-equivalent a day. Oil production will be stable on quarter, while gas and low-carbon energy production is set to fall slightly, BP said.

At 0737 GMT, shares were down 2.5% at 462.50 pence, brining the shares to 0.9% fall in the year so far.

Second-quarter results are scheduled to be released on July 30.

Write to Christian Moess Laursen at christian.moess@wsj.com

(END) Dow Jones Newswires

July 09, 2024 03:54 ET (07:54 GMT)

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