BP Expects Write-Downs of Up to $4.5 Billion and Lower Net Debt in Third Quarter
Key Facts
BP expects to report post-tax adjusting items related to asset impairments of between $3.0 billion and $4.5 billion in its third-quarter 2026 results, according to the trading update issued by the company on October 13. It said the items relate mainly to transformation activities in gas and low-carbon energy, and are excluded from its underlying replacement cost profit measure. The update comes ahead of full results on October 30, while the company expects net debt at quarter-end to fall to $13.5–14.5 billion from $22.3 billion in the second quarter. It also expects a reduction of about $9.0 billion to $10.0 billion in the total of net debt, hybrid bonds, leases and Gulf of America decommissioning obligations compared with the previous quarter. These figures are the company’s interim estimates, not final quarterly results.
BP linked the range of write-downs to transformation activities in gas and low-carbon energy, as it adjusts spending and investment priorities. The company announced in February 2025 that it would cut spending on its transition businesses by $5 billion a year, to no more than $2 billion, and increase investment in oil and gas production by about 20% to $10 billion. Chief Executive Murray Auchincloss said at the time that the company would focus its spending on “higher-return businesses to support growth” and would be “highly selective” in renewable energy investments. This strategic shift places gas and low-carbon energy activities in the background to the impairment-related items the company expects for the quarter. BP will provide an update on its strategy and outlook in New York on December 15.
On production, the company forecast upstream output of 2.190–2.240 million barrels of oil equivalent per day, compared with 2.201 million in the second quarter. It attributed the estimate to a partial recovery from seasonal maintenance, offset by a reduction in its Latin America stake and ongoing disruption in the Middle East. It estimated production from its gas and low-carbon energy segment at 775,000–795,000 barrels of oil equivalent per day, and oil production and operations output at 1.415–1.445 million barrels of oil equivalent per day. The comparison with the previous quarter shows that the production range does not signal a broad-based upgrade to expectations, as BP narrowed the range while accounting for operating factors and ownership stakes. Final results will reflect output recorded during the quarter, after financial reporting is completed.
In products, BP expects improved realized refining margins to add between $1.9 billion and $2.1 billion to the division’s results compared with the second quarter. It estimated its average refining marker margin at $46.7 per barrel in the third quarter, versus $29.6 in the previous quarter, but said marker margins do not represent the actual margins achieved by the company. At the same time, it expects refinery throughput of 1.375–1.405 million barrels per day, compared with 1.467 million in the second quarter. It attributed the lower throughput to the completion of the sale of the Gelsenkirchen refinery on July 31 and reduced maintenance and planned turnaround activity. The division’s outlook therefore combines the effect of stronger margins with lower throughput.
BP expects its gas marketing and trading result to be significantly higher than in the second quarter, while it expects the oil trading result to be broadly stable compared with the same period. On cash flows, it expects working capital release of between zero and $1 billion and capital expenditure of about $3.0 billion during the quarter. It cited the redemption of $1 billion in hybrid bonds on September 30 among the factors affecting the change in debt. It also expects the group’s underlying effective tax rate to be about 30%, attributing this to the geographic distribution of profits. The company said it will update its full-year guidance in its third-quarter results, scheduled for publication on October 30.
BP shares closed at $49.44 on October 19, $49.39 on October 20, $49.85 on October 21 and $50.05 on October 22, before closing at $51.32 on October 23. A report published by Investing.com and attributed to Reuters said the shares rose more than 1% on October 13 after the company announced its forecasts for write-downs, debt and refining margins. EL7 previously published a report on October 13 on BP’s expectation of write-downs of up to $4.5 billion in the third quarter. The current trading update places those forecasts within a broader package covering production, refining, taxes and debt. The company is due to publish its quarterly results on October 30, followed by a strategy and outlook update on December 15.