BP PLC (LSE:BP.) has warned it will take impairment charges of between $4 billion and $5 billion in the final quarter of 2025, largely linked to its transition businesses, as the oil major prepares investors for a weaker end to the year.
The write-downs, which reflect a reduction in the book value of assets, will be reported as post-tax adjusting items and will not be included in BP’s underlying replacement cost profit, the company’s preferred measure of operating performance.
The charges are expected to fall mainly within the gas and low-carbon energy division, underlining the financial pressure facing parts of BP’s clean energy portfolio.
In a trading statement published on Wednesday, BP said upstream production in the fourth quarter was expected to be broadly flat compared with the previous three months. Oil production and operations are forecast to be steady, while output from gas and low carbon energy is set to be lower.
Lower commodity prices are also weighing on performance. Brent crude averaged $63.73 a barrel in the quarter, down from $69.13 in the third quarter, while gas prices and refining margins were little changed.
BP said price movements would reduce earnings from oil production by between $0.2 billion and $0.4 billion compared with the prior quarter, with a further $0.1 billion to $0.3 billion impact in gas and low carbon energy.
In the customers and products division, BP expects seasonally lower sales volumes, broadly flat fuel margins and a weak oil trading result.
Stronger refining margins of about $0.1 billion are expected to be offset by higher maintenance activity and reduced capacity following a fire at the Whiting refinery in the United States.
One bright spot is the balance sheet. BP said net debt at the end of the quarter was expected to fall to between $22 billion and $23 billion, down from $26.1 billion at the end of the third quarter.
The reduction reflects divestment proceeds of about $3.5 billion in the quarter, taking full-year asset sale proceeds to around $5.3 billion, ahead of previous guidance.
For the full year, BP now expects its underlying effective tax rate to be about 42%, higher than earlier guidance of around 40%, mainly because profits were generated in higher-tax jurisdictions.
BP is due to publish its full fourth-quarter and full-year results on 10 February.