BP expects about $1bn in impairment charges on gas and low-carbon business

The charges will be excluded from underlying replacement cost profit, the measure BP uses to report trading performance. They follow up to $5bn in energy transition-related writedowns announced earlier this year as BP scales back low-carbon projects.

Despite the impairment, BP expects stronger refining margins to add $1.2bn to $1.4bn to second-quarter results, and oil trading to outperform the first quarter. Net debt is forecast to fall to $22bn-$23bn from $25.3bn, the results preview said.

The strategy shift behind the charge

The impairment comes after BP's retreat from the low-carbon push it set in 2020. That year BP pledged a 40% cut in oil and gas production and a tenfold increase in renewables investment, The Guardian reported. It watered the production cut to 25% in 2023.

After a downturn in profits in 2024, BP announced it would cut renewable investments and raise its commitment to fossil fuels. Sustainability Magazine reported the renewable cut at more than $5bn a year, while The Guardian put it at $3bn and reported that BP would increase oil and gas spending to $10bn each year.

BP's 2024 results showed a 35% fall in annual profit to $8.9bn and a 61% drop in fourth-quarter profit year on year. Its operational Scope 1 and 2 emissions were 38% lower in 2024 than in 2019, but Scope 1 emissions rose to 32.8MtCO2e from 31.1MtCO2e in 2023, according to its sustainability report. BP dropped an earlier 'net zero production' aim and kept targets for net zero operations by 2050 and a 45% to 50% cut in operational emissions by 2030 against a 2019 baseline.

New chief, two units

Meg O'Neill took the helm on 1 April, becoming BP's fifth chief since 2020. BP intends to reorganise into two units, upstream and downstream, replacing three main business units. A spokesperson confirmed the plan after the Financial Times reported it and said there is no set timeline. CNBC reported, citing a source, that Elliott, which holds just over 5% of BP, had called a year earlier for one upstream and one downstream unit.

Portfolio and spending

BP also agreed to sell a majority stake in Castrol, valuing the lubricants unit at just over $10bn including debt, one of its largest divestments in years, OilPrice reported. Proceeds are meant to strengthen the balance sheet and fund core investments.

A Seeking Alpha analyst note says BP plans about $10bn a year of oil and gas investment through 2027, including LNG expansion, and that its shares trade at 8.5x forward earnings, a discount to US peers. The author disclosed a long position in BP.