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Tisdag Jul 9 2024 13:05
4 min
Weak refining margins and lower oil trading results will reduce British multinational oil and gas company BP's second-quarter profit by up to $700 million, the company announced on Tuesday, causing its shares to drop over 4% and drag London’s FTSE 100 index.
This warning has led several analysts to lower their earnings estimates and poses a challenge for CEO Murray Auchincloss as he works to rebuild investor confidence in BP's strategy.
In a similar move on Monday, U.S. oil major Exxon Mobil signalled that lower refining margins and natural gas prices would diminish its second-quarter profit.
The London-listed company attributed the lower refining margins to weak diesel prices and narrower North American heavy crude oil differentials, which impact its large refinery in Whiting, Indiana. As a result, BP expects second-quarter earnings to be between $500 million and $700 million lower than the previous quarter.
Despite a high level of refinery maintenance compared to the first quarter, BP expects an earnings boost of around $500 million as the Whiting refinery resumes operations.
BP also anticipates recording $1 billion to $2 billion in charges in the second quarter, mainly related to its review of the Gelsenkirchen refinery in Germany.
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BP shares fell 4.38% by 13:00 GMT, while rival oil multinational Shell's shares gave up a small gain to dip by 0.1%. The FTSE 100 index was down by over 0.5% on the day.
Citi analysts reduced their Q2 earnings per share estimate by 9%, while Jefferies analysts expected today’s update to result in a 20% earnings downgrade for BP.
Investors forecast BP's second-quarter underlying replacement cost profit, the company's measure of net income, to be $3.13 billion, according to LSEG data.
Earlier this year, Reuters reported that BP had imposed a hiring freeze and paused renewable projects as part of Auchincloss' plan to boost returns and cut costs by $2 billion.
In a comment to Reuters, AJ Bell investment director Russ Mould noted:
"Alongside any major strategic shifts, BP needs to demonstrate competence in the day-to-day running of the business and today's update doesn't help in that sense”.
BP, set to release its quarterly results on July 30, stated that its upstream production in the second quarter is expected to remain broadly flat compared to the previous quarter.
Oil and gas production stood at 2.38 million barrels of oil equivalent per day (boepd) in the first quarter, following field start-ups in Azerbaijan and the United States.
BP also said higher realized oil prices in the second quarter would boost profits by $100 million to $300 million.
Last week, Shell announced it would take an impairment charge of up to $2 billion related to the sale of its Singapore refinery and the halt of construction at one of Europe’s largest biofuel plants in the Netherlands.
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