BP forecasts $600m earnings fall after tighter margins at refineries

BP has warned that its earnings will be reduced by up to $600 million owing to weaker margins at its refineries and lower revenues from petrol and oil products.
The FTSE 100 energy company has told investors that its margins from refining operations dropped from an average $20.6 a barrel in the second quarter to an average of $16.5 a barrel in the third quarter, and that a drop in fuel sales would have a $300 million impact on earnings.
BP also expects net debt to come in higher than expected as proceeds from the sale of assets would be reported in the fourth quarter of its financial year. The group’s share price was down ¼p, or 0.06 per cent to 410¾p.
Murray Auchincloss, the chief executive of BP, has abandoned the net zero strategy put in place by his predecessor Bernard Looney, with reports this week indicating that he was preparing to drop an ambitious target to cut its oil and gas production by the end of the decade. BP has also announced that it will exit the onshore wind market in the US after taking a $1.1 billion one-off pre-tax writedown on the projects last year.
Auchincloss is attempting to rebuild investor confidence after the abrupt resignation of Looney last year, and is seeking to close BP’s valuation gap with rivals in the oil and gas sector. The Canadian executive has announced plans to cut costs of at least $2 billion by the end of 2026 and has said that the company will only hire externally for frontline roles, well-site leaders and other safety critical roles.
Dan Coatsworth, an investment analyst at AJ Bell, said the energy giant’s shares had fallen behind Shell’s as well as peers in the US. “This statement covers a period when oil prices fell, but the recent turmoil in the Middle East has seen crude recover and, assuming this holds, that may be reflected in BP’s performance for the final three months of the year,” Coatsworth added.
“Auchincloss, who took the helm on a permanent basis at the start of the year, needs to convince the market he has a long-term plan which is not just about tearing up the old one.”
Brent crude, the international benchmark, pushed above $80 a barrel for the first time since August earlier this week as the conflict in the Middle East escalated. Prices jumped when President Biden said Israel may launch attacks on Iran’s oil facilities.