British energy giant BP PLC announced that its third-quarter performance is expected to benefit from increased upstream production and improved refining margins, though weak performance in the crude trading division is anticipated to pressure overall profitability.
The company is currently undergoing strategic restructuring, with a focus on reviewing its asset portfolio to strengthen its balance sheet amid earnings pressure and activist investor demands. BP PLC expects third-quarter upstream production to exceed second-quarter levels, driven primarily by growth from its U.S. shale gas business BPX Energy and the gas and low-carbon energy segment. Previously, the company had anticipated third-quarter production would be slightly below the previous quarter.
During the reporting period, Brent crude averaged $69.13 per barrel, up slightly from $67.88 in the previous quarter. The company indicated that gas marketing and trading performance is expected to remain at moderate levels, while the crude trading division showed weak results, marking a significant decline from the strong performance in the second quarter.
BP PLC has recently abandoned its strategy of accelerated low-carbon energy expansion, refocusing on its core oil and gas operations to boost shareholder returns and narrow the valuation gap with peers. Activist investment firm Elliott Investment Management has established a position in BP PLC and is pushing for more substantial reforms. New Chairman Albert Manifold emphasized in an internal address earlier this month that the company must quickly simplify its overly complex business structure. The company's lubricants brand Castrol has been placed on the potential divestiture list.
BP PLC stated that rising refining margins are expected to provide a $300-400 million earnings boost for the downstream products business. The company anticipates third-quarter net debt to remain essentially flat at approximately $26 billion. Investment firm Jefferies believes this guidance will be welcomed by investors. BP PLC targets reducing net debt to between $14-18 billion by the end of 2027.
The company is advancing deleveraging through cost reductions and asset disposals, planning to sell $20 billion in assets cumulatively by 2027, with multiple transactions already announced this year. Additionally, BP PLC expects to record up to $500 million in asset impairment losses during the third quarter.