By Adam Whittaker
BP expects a rise in upstream production and higher refining margins in its products segment to boost earnings, but warned of a weak contribution from its oil trading division.
The company is in the midst of a strategic reset and review of its portfolio as it seeks to shore up its balance sheet amid declining profitability and pressure from an activist investor.
The British energy major said Tuesday that upstream production for the third quarter will be higher than the previous three months, driven by increased gas production at its U.S. shale business BPX energy and from its gas and low-carbon energy segment.
BP had previously guided for upstream production in the quarter to be slightly lower than in the second quarter.
The rise in production will be complemented by a slight rise in average Brent crude prices, which ticked up to $69.13 a barrel from $67.88 in the prior quarter.
However, BP warned that its oil trading result is expected to be weak and will, therefore, drag on earnings, reversing the unit's strong performance in the second quarter. BP said its gas marketing and trading result is expected to be average.
The company has scrapped its push into low-carbon energy and is doubling down on oil-and-gas production in an effort to boost shareholder valuations as its shares lag behind rivals.
Activist hedge fund Elliott Investment Management has taken a stake in the company and is seeking significant changes. In a recognition of this pressure, the company's new chairman Albert Manifold told staff in early October that it must act with urgency to simplify its overly complex portfolio.
One division earmarked for disposal is its lubricants business Castrol.
Within its downstream division, higher refining margins will deliver a $300 million to $400 million boost in its products segment, BP said.
It said it expects net debt to remain broadly flat on-quarter at around $26 billion, a guidance that should be well received by investors, Jefferies analysts Mark Wilson and Kai Ye Loh wrote in a note. BP is targeting $14 billion-$18 billion in net debt by the end of 2027.
The company has made debt reduction a core target and is seeking to deliver billions through structural cost cuts and divestments. It is aiming for $20 billion of asset sales by 2027 and has announced several sales already this year.
BP said it expects to book up to $500 million in asset impairments across its portfolio.
Write to Adam Whittaker at adam.whittaker@wsj.com
(END) Dow Jones Newswires
October 14, 2025 03:33 ET (07:33 GMT)
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