British oil giant BP announced on Tuesday that it expects “adverse adjustments” after tax of “between $1 billion and $2 billion” in its second-quarter results, primarily due to asset write-downs.
Impact of German Refinery Transformation:
These adjustments include charges related to the transformation of BP’s Gelsenkirchen refinery in Germany, the company stated in a press release. BP is set to release its full second-quarter results on July 30th.
In March, BP announced its intention to reduce the total production capacity of the Gelsenkirchen site starting in 2025, while increasing the production of low-emission fuels. This strategic shift reflects the company’s evolving focus towards more sustainable energy solutions.
Refining Margins and Oil Sales:
BP also cautioned that its refining margins will be “significantly lower” compared to the previous quarter, and its oil sales are expected to decline. This indicates a challenging operating environment for the refining sector.
The company revised its production forecast, now anticipating “overall stable” production compared to the previous quarter, particularly for oil. However, it foresees a “slightly lower” production of gas and low-carbon energy.
Market Reaction:
Following the announcement, BP’s shares on the London Stock Exchange experienced a decline of 3.36% to 458.70 pence shortly after the market opened. This reflects investor concerns about the company’s financial performance in the second quarter.
BP’s competitor, Shell, also announced potential write-downs of up to $2 billion in the second quarter last week. These write-downs are primarily related to a massive biofuels project in the Netherlands, the construction of which Shell recently suspended.
Industry Challenges:
Both BP and Shell’s announcements highlight the challenges faced by the oil industry in the current market environment. Fluctuating oil prices, changing regulatory landscapes, and the transition towards cleaner energy sources are all contributing factors to these adjustments and write-downs.