BP expects its results for the fourth quarter of 2024 to be affected by lower production levels and diminished refining margins alongside oil trading results. The company has also indicated potential impairments of up to $2 billion across various segments, signaling a cautious outlook for stakeholders. The UK-based oil and gas heavyweight foresees a decrease in upstream production for the upcoming quarter, which reflects a comparative decline from the previous quarter.
This downturn is primarily attributed to lowered production in both the oil production and operations sector, as well as the gas and low-carbon energy divisions. Particularly within the oil production and operations segment, BP anticipates an unfavorable impact ranging from $200 million to $400 million.
This situation is further complicated by price lags affecting production in critical areas such as the Gulf of Mexico and the United Arab Emirates. On a slightly more positive note, exploration write-offs are expected to be around $200 million less than what was recorded in the third quarter of 2024. In contrast, the gas and low-carbon energy unit is expected to show a positive impact of between $100 million and $200 million in Q4 2024, attributed to better average gas marketing and trading results. Analysts at RBC Capital Markets have adjusted their estimates following this trading update, emphasizing increases in corporate costs, a reduction in realized refining margins, and additional one-off charges associated with recent acquisitions made by BP.
They further noted that after taking these changes into account, along with a slight uptick in the effective tax rate, the estimated net income has been revised down from $1.63 billion to $1.31 billion. This reflects a startling 33% decline compared to current consensus estimates. For the entirety of 2024, the projected underlying effective tax rate has been increased to approximately 42%, up from the previously guided 40%.
This revision is primarily due to shifts in geographical profit distribution. Annual charges are now forecasted to reach $600 million—significant in contrast to the earlier guidance suggesting between $300 million to $400 million, driven largely by foreign exchange losses. Investors and analysts alike are awaiting BP's scheduled release of its fourth quarter and full-year results for 2024 on February 11.
Furthermore, a key capital markets event that was originally slated for the same day in New York has now been rescheduled to February 26 in London. This change aims to accommodate Chief Executive Officer Murray Auchincloss as he recuperates from a planned medical procedure. With regard to leadership transitions, RBC noted, "Following Murray Auchincloss' permanent appointment as CEO, expectations were set high for a reinvigorated investor interest under a revitalized strategy.
While BP has yet to unveil an entirely new capital markets direction, it appears that recent management decisions have shifted towards a more returns-focused agenda than what we have witnessed in previous years. However, operational challenges coupled with uncertainties concerning returns from new growth avenues have negatively influenced its stock performance." As of mid-morning on Tuesday, BP shares were trading nearly 3% lower in London, reflecting investor sentiment amidst these forecasts..