BP Flags Up to $4.5B Q3 Impairments as Refining Margins Surge
BP sits 45% above its 52-week low of $32.72.
Summary
BP expects $3B-$4.5B in post-tax impairments in Q3, mostly tied to transition businesses in gas and low-carbon energy. That's a material hit, but refining margins are jumping to $46.70/bbl from $29.60 in Q2, adding $1.9B-$2.1B to results. Gas trading is also expected to rise significantly, while oil production realizations will drag by $200M-$400M. Net debt is forecast to fall to $13.5B-$14.5B from $22.3B. Upstream production is expected to be 2,190–2,240 mboe/d, with gas & low carbon energy production at 775–795 mboe/d and oil production & operations at 1,415–1,445 mboe/d. Gas & low carbon energy realizations are expected to have an impact of +$0.1–0.3 billion, including changes in non-Henry Hub natural gas markers. Exploration write-offs are expected to be significantly lower due to the prior quarter impact of the Bay Du Nord sale. DD&A is expected to be slightly higher due to a change in production mix. Prior quarter equity accounted earnings benefited from higher contributions in Latin America, which are not expected to repeat in the third quarter. Customers segment result is expected to be significantly lower, driven by weaker fuels margins and higher base oil prices in Castrol, as well as a lower contribution from midstream, partly offset by slightly higher volumes due to seasonal effects. Refining throughput is expected to be 1,375–1,405 mb/d, reflecting the completion of the Gelsenkirchen divestment on 31 July and lower planned turnaround and maintenance activity. Oil trading result is expected to be broadly flat compared with the second quarter. Group underlying effective tax rate for the third quarter is expected to be around 30%, due to the geographical mix of profits. Net debt reduction includes the redemption of $1.0 billion of hybrid securities on 30 September 2026. Remaining hybrid bonds and securities are expected to be around $12.0 billion at 3Q 2026. Net debt reduction includes higher income taxes paid of around $1.0 billion. Working capital release is expected in the range of $0–1.0 billion. Capital expenditure is expected to be around $3.0 billion. Total of net debt, hybrid bonds, leases, and Gulf of America settlement liabilities is expected to reduce by around $9.0–10.0 billion compared with the second quarter. Post-tax adjusting items relating to impairments in the range of $3.0–4.5 billion are excluded from underlying replacement cost profit. Full Q3 results come October 30.
Updated with an SEC 6-K filing · What changed
Updates
· SEC 6-K — BP's 6-K trading statement details Q3 guidance: net debt expected $13.5–14.5B, impairments $3–4.5B, refining margin impact +$1.9–2.1B, and production 2,190–2,240 mboe/d.
- Production
- Upstream production guidance mainly reflects seasonal maintenance recovery partly offset by bp's reduced equity interest in Latin America.
- Third quarter includes the impact of continued disruption in the Middle East and no impact from weather events in the Gulf of America.
- Gas & low carbon energy production is expected to be 775 to 795 mboe/d (2Q 2026: 765 mboe/d).
- Oil production & operations production is expected to be 1,415 to 1,445 mboe/d (2Q 2026: 1,436 mboe/d).
- Realizations and Write-offs — Gas & low carbon energy realizations are expected to have an impact in the range of +$0.1 to 0.3 billion, including changes in non-Henry Hub natural gas markers. Exploration write-offs are expected to be significantly lower due to the prior quarter impact of the Bay Du Nord sale.
- Equity Earnings — Prior quarter equity accounted earnings benefited from higher contributions in Latin America, which are not expected to repeat in the third quarter.
- Customers Segment — Customers segment result is expected to be significantly lower, driven by weaker fuels margins and higher base oil prices in Castrol, as well as a lower contribution from midstream, partly offset by slightly higher volumes due to seasonal effects.
- Refining and Trading — Refining throughput is expected to be 1,375 to 1,405 mb/d (2Q 2026: 1,467 mb/d), reflecting the completion of the Gelsenkirchen divestment on 31 July and a lower planned turnaround and maintenance activity. Oil trading result is expected to be broadly flat compared with the second quarter.
- Tax Rate — Group underlying effective tax rate for the third quarter is expected to be around 30%, due to the geographical mix of profits.
- Net Debt Components — Net debt reduction includes the redemption of $1.0 billion of hybrid securities on 30 September 2026. Remaining hybrid bonds and securities are expected to be around $12.0 billion at 3Q 2026 (2Q 2026: $13.0 billion).
- Impairments — Post-tax adjusting items relating to impairments in the range of $3.0 to 4.5 billion are excluded from underlying replacement cost profit.
- Price Sensitivities — Brent oil price sensitivity: +/- $1/bbl impacts pre-tax replacement cost operating profit by $340 million. Henry Hub natural gas price sensitivity: +/- $0.10/mmBtu impacts pre-tax replacement cost operating profit by $40 million.
All 22 details
- Upstream production guidance mainly reflects seasonal maintenance recovery partly offset by bp's reduced equity interest in Latin America.
- Third quarter includes the impact of continued disruption in the Middle East and no impact from weather events in the Gulf of America.
- Gas & low carbon energy production is expected to be 775 to 795 mboe/d (2Q 2026: 765 mboe/d).
- Oil production & operations production is expected to be 1,415 to 1,445 mboe/d (2Q 2026: 1,436 mboe/d).
- Gas & low carbon energy realizations are expected to have an impact in the range of +$0.1 to 0.3 billion, including changes in non-Henry Hub natural gas markers.
- Exploration write-offs are expected to be significantly lower due to the prior quarter impact of the Bay Du Nord sale.
- DD&A is expected to be slightly higher due to a change in production mix.
- Prior quarter equity accounted earnings benefited from higher contributions in Latin America, which are not expected to repeat in the third quarter.
- Customers segment result is expected to be significantly lower, driven by weaker fuels margins and higher base oil prices in Castrol, as well as a lower contribution from midstream, partly offset by slightly higher volumes due to seasonal effects.
- Refining throughput is expected to be 1,375 to 1,405 mb/d (2Q 2026: 1,467 mb/d), reflecting the completion of the Gelsenkirchen divestment on 31 July and a lower planned turnaround and maintenance activity.
- Oil trading result is expected to be broadly flat compared with the second quarter.
- Group underlying effective tax rate for the third quarter is expected to be around 30%, due to the geographical mix of profits.
- Net debt reduction includes the redemption of $1.0 billion of hybrid securities on 30 September 2026.
- Remaining hybrid bonds and securities are expected to be around $12.0 billion at 3Q 2026 (2Q 2026: $13.0 billion).
- Net debt reduction includes higher income taxes paid of around $1.0 billion.
- Working capital release in the range of $0 to 1.0 billion.
- Capital expenditure of around $3.0 billion.
- Total of net debt, hybrid bonds, leases, and Gulf of America settlement liabilities expected to reduce by around $9.0 to 10.0 billion compared with the second quarter.
- Post-tax adjusting items relating to impairments in the range of $3.0 to 4.5 billion are excluded from underlying replacement cost profit.
- Brent oil price sensitivity: +/- $1/bbl impacts pre-tax replacement cost operating profit by $340 million.
- Henry Hub natural gas price sensitivity: +/- $0.10/mmBtu impacts pre-tax replacement cost operating profit by $40 million.
- Refining indicator margin sensitivity: +/- $1/bbl impacts pre-tax replacement cost operating profit by $450 million.
- Production
At the time of this announcement, BP was trading at $47.48 on NYSE in the Energy & Transportation sector, with a market capitalization of approximately $119.9B. The 52-week trading range was $32.72 to $48.27. This news item was assessed with negative market sentiment and an importance score of 8 out of 10. Source: Seeking Alpha.