BP (LON:BP) has announced that it expects to incur impairment charges ranging from $1 billion to $2 billion in the fourth quarter of 2024, sending its London-listed shares lower. The oil-and-gas major also forecast a decline in upstream production, further straining investor confidence.

Impairment Charges Across Business Segments

BP reported that the non-cash, post-tax impairment charges will be spread across all business segments. These charges reflect the company's reassessment of assets and the challenging market conditions impacting the oil and gas industry. As a result, BP's financial outlook for the fourth quarter has been dampened, and analysts are revising their earnings estimates.

Upstream Production Declines

In addition to the impairment charges, BP has projected a decline in upstream production during the fourth quarter. This decrease is expected in both oil production and gas. However, the low-carbon energy segment is still set to benefit from higher natural gas market prices, helping mitigate some of the negative effects on overall output.

This decrease in upstream production is a significant concern for BP, as lower production levels typically lead to reduced revenue.

Increased Corporate Costs and Foreign Exchange Losses

BP also revised its forecast for corporate costs in 2024. The company now expects underlying annual charges to reach $600 million, up from the previous range of $300 million to $400 million. The rise in costs is attributed to foreign exchange losses, reflecting the impact of global currency fluctuations on BP's financials.

Analyst Revisions and Forecast

Following BP's announcement, RBC Capital Markets downgraded its forecast for BP's fourth-quarter net income to $1.63 billion, down from its earlier estimate of $1.89 billion. Analysts cited the higher corporate costs and weaker realized refining margins as factors contributing to the lower-than-expected earnings.

Jefferies analysts also echoed similar concerns, pointing to potential downside risks in BP's earnings, driven by negative revisions in customer and product revenues.

Capital Markets Day Postponement

In addition to the financial update, BP also noted that its Capital Markets Day, originally scheduled for February 11 in New York, has been postponed. The event will now take place on February 26 in London, due to a medical procedure undergone by BP's CEO Murray Auchincloss. BP confirmed that Auchincloss is expected to return to the office by February.

Conclusion: Navigating Through Challenges

BP's fourth-quarter update reflects the ongoing challenges in the oil and gas industry, including impairment charges, lower upstream production, and rising corporate costs. However, the company's low-carbon energy segment remains a potential growth driver, especially with favorable natural gas prices.

For those seeking to understand BP's financial health and performance, the Key Metrics (TTM) API offers valuable insights into real-time financial data.

Moreover, for a broader industry perspective, the Industry P/E Ratio API can help assess BP's standing in relation to its peers in the energy sector.