BP shares drop on Tuesday after the energy giant announced lower refining margins and an expected impairment of up to $2 billion for the second quarter.
BP shares drop
By 06:30 ET (10:30 GMT), BP shares had fallen 3.9%, trading at 455.98 pence.
Key Factors Impacting Q2 Results
In a statement released on Tuesday, BP highlighted several issues affecting its second-quarter results, due on July 30:
- Refining Margins: Weak refining margins are expected to reduce profits by $500 million to $700 million.
- Oil Trading Performance: Disappointing oil trading performance will further impact results.
- Impairment Charge: BP anticipates an impairment of up to $2 billion related to its review of the Gelsenkirchen refinery in Germany.
Upstream Production and Trading
BP expects upstream production for the second quarter to be “broadly flat” compared to the previous quarter. The company also forecasts an average result in gas marketing and trading.
Previous Quarter Performance
BP’s first-quarter results also missed expectations. The energy giant reported a lower-than-anticipated underlying profit, primarily due to a decline in oil and gas prices.
- Underlying Replacement Cost Profit: This key measure of net income dropped to $2.72 billion from $4.96 billion in the same period last year. Analysts had forecasted a profit of $2.87 billion.
- Additional Factors: The first-quarter results were also affected by an outage at BP’s Whiting refinery in Indiana and weaker fuel margins. These challenges offset a strong oil trading performance and higher realized refining margins.
Conclusion
BP shares drop reflects investor concerns over the company’s warning of lower second-quarter results and significant impairment charges. The energy giant’s performance continues to suffer from fluctuating oil and gas prices, refining margins, and operational challenges at key refineries.
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