BP PLC's (LSE:BP.) pared-back fourth-quarter trading update offered little to surprise the market, but it reinforced a growing sense of strategic drift as the company approaches a change at the top.
Production in the final quarter is expected to be “broadly flat”, a formulation that often masks a modest decline, while lower oil and gas prices are set to weigh further on earnings.
BP also flagged weak oil trading, echoing comments from peers and confirming that volatility did not translate into profits late in the year.
More eye-catching were the non-operational items. The oil major said it expects post-tax impairment charges of up to $5 billion, largely tied to its renewables and low-carbon businesses.
The write-downs underline the thin margins and slower-than-hoped returns from parts of the transition portfolio, which has already been a source of frustration for investors.
At the same time, the effective tax rate is set to rise to about 42%, from 40%, reflecting a less favourable geographical mix of profits.
There was some relief on the balance sheet. Net debt is expected to fall to $22–23 billion (from $26.1 billion in the third quarter), helped by $3.5 billion of divestment proceeds. Even so, the overall picture is one of muted performance, broadly in line with what other oil majors have already signalled.
Analysts at Panmure Liberum described the update as vague and the combination of higher taxes and further impairments as disappointing.
Attention is now firmly shifting away from near-term numbers and towards the arrival of incoming chief executive Meg O’Neill in the second quarter.
BP reports full-year results on 10 February. The shares were down 0.5% at 434.7p.