BP has indicated it expects to take post-tax impairments of $4 billion to $5 billion in the fourth quarter of 2025, largely affecting its gas and low-carbon energy segments. This decision reflects a re-evaluation of its energy transition strategy following a leadership change, with the company pivoting back towards its core fossil fuel operations. The impairments are excluded from its underlying replacement cost profit.
Financial analysts, such as Jefferies, described the update as a "small -ve," estimating a 5% reduction in consensus net income by $1.83 billion. This, according to Jefferies, is mainly driven by weaker-than-expected price realizations in gas and low-carbon energy. Gas marketing and trading results are expected to be "average," similar to the prior quarter, which Jefferies identified as the primary source of downside in the update.
BP also reported that lower oil prices and weak oil trading results are expected to weigh on fourth-quarter earnings. Brent crude averaged $63.73 per barrel in the fourth quarter, down from $69.13 in the previous quarter. Weak gas prices are also contributing to reduced earnings. The company anticipates full-year divestments to reach approximately $5.3 billion, surpassing its prior guidance of $4 billion, contributing to a projected net debt reduction to $22 billion-$23 billion by the end of 2025, down from $26.1 billion at the end of the third quarter.
The strategic shift includes a drastic reduction in annual spending on energy transition businesses, from $7 billion to a maximum of $2 billion. BP is also seeking to sell its stake in solar power group Lightsource bp, has spun off its offshore wind business into a joint venture, and scrapped plans for a biofuels plant in Amsterdam. The company's 2025 underlying effective tax rate is now expected to be 42%, up from 40%.
