BP Warns of 4th Quarter Profit Hit as Production and Refining Margins Fall

Logo of British Petrol BP is seen at a petrol station in Pienkow, Poland, June 8, 2022. REUTERS/Kacper Pempel/File Photo
Logo of British Petrol BP is seen at a petrol station in Pienkow, Poland, June 8, 2022. REUTERS/Kacper Pempel/File Photo
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BP Warns of 4th Quarter Profit Hit as Production and Refining Margins Fall

Logo of British Petrol BP is seen at a petrol station in Pienkow, Poland, June 8, 2022. REUTERS/Kacper Pempel/File Photo
Logo of British Petrol BP is seen at a petrol station in Pienkow, Poland, June 8, 2022. REUTERS/Kacper Pempel/File Photo

BP warned on Tuesday that lower production, weak refining margins and sluggish trading would see its profit in the fourth quarter of 2024 fall from the previous three months.
Since taking the helm a year ago, CEO Murray Auchincloss has scaled back the firm's energy transition strategy in an effort to boost profits and regain investor confidence as BP's share lags behind its competitors, Reuters reported.
A capital markets event previously scheduled for Feb. 11 in New York will instead take place on Feb. 26 in London, BP said, as Auchincloss is recovering from a planned medical procedure.
BP said the drop in refining margins and a higher impact from turnaround and maintenance activity would result in a quarter-on-quarter drop in profit of up to $300 million, while realizations in its oil production and operations unit could lead to a further reduction of $200 million to $400 million. It also expects a drop in upstream production.
The company's third quarter underlying replacement cost profit, the company's definition of net income, was $2.27 billion, already the weakest since the fourth quarter of 2020, when profits collapsed during the pandemic.
Global demand for gasoline and diesel has fallen short of expectations, while the launch of new oil refineries in Asia and Africa has resulted in oversupply.
Last week, Shell warned of weakness across multiple divisions, while Exxon Mobil signaled a $1.75 billion drop in fourth-quarter earnings.
BP, which will release fourth quarter results on Feb. 11, expects its net debt at end-December to have fallen from the end of the previous quarter. Exploration write-offs are seen falling by $100 million to $200 million.



Urgent Financial Tasks Await Lebanon’s Emerging Government

Lebanese President Joseph Aoun stands between Speaker of Parliament Nabih Berri and caretaker Prime Minister Najib Mikati (dpa)
Lebanese President Joseph Aoun stands between Speaker of Parliament Nabih Berri and caretaker Prime Minister Najib Mikati (dpa)
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Urgent Financial Tasks Await Lebanon’s Emerging Government

Lebanese President Joseph Aoun stands between Speaker of Parliament Nabih Berri and caretaker Prime Minister Najib Mikati (dpa)
Lebanese President Joseph Aoun stands between Speaker of Parliament Nabih Berri and caretaker Prime Minister Najib Mikati (dpa)

A broad internal consensus, encompassing both political and economic dimensions, is taking shape to adopt the principles outlined in the presidential inauguration address as the foundation of the new government’s program and ministerial statement. This approach aims to sustain Lebanon’s immediate and strong positive momentum, which is reinforced by widespread support on both Arab and international levels.

Economic bodies and professional unions representing business sectors have openly expressed their relief and full support for the strategic directions set by President Joseph Aoun following his election. However, they have made it clear that maintaining this positive momentum depends on the formation of a reform-oriented rescue government, composed of competent, experienced, and honest ministers. This government must also collaborate constructively with the president.

According to a senior financial official, the rescue mission will be challenging due to years of governmental inaction and constitutional voids, which led to a deterioration in public sector operations and the accumulation of economic, financial, and monetary crises over the past five years. These challenges were further compounded by a devastating war, which inflicted severe human and financial losses estimated at approximately $10 billion, thereby worsening the country’s financial gap, now estimated at $72 billion.

Economic and banking circles are looking to the new government to swiftly capitalize on extensive international support by restoring trust and reestablishing financial channels between Lebanon and its regional and international partners. Key to this effort are explicit and transparent commitments to combating illegal economic activities, corruption, smuggling, money laundering, and drug trafficking. In parallel, the government must prioritize strengthening judicial independence and implementing strict controls over land, sea, and air borders.

The national consensus evident in the presidential election, according to Mohammad Choucair, head of Lebanon’s economic associations, paves the way for constructive collaboration among political factions. This collaboration is crucial for addressing challenges, rebuilding the state, and benefiting from renewed international and Arab—particularly Gulf and Saudi—interest in Lebanon. Choucair emphasized the importance of normalizing relations with Gulf nations, supporting Lebanon’s recovery, and providing resources for reconstruction efforts.

One of the urgent tasks for the new government, according to the financial official, is revisiting the draft 2024 state budget, which was previously submitted to parliament. Adjustments are necessary to address fundamental discrepancies in expenditure and revenue projections, taking into account significant changes brought about by the Israeli war.

Ibrahim Kanaan, chairman of the Parliamentary Finance Committee, described the budget as “unrealistic, if not entirely fictitious,” particularly in its revenue estimates. He pointed out that revenue increases were based on income and capital taxes, internal duties, and trade-related fees, all of which have been severely impacted by the war.

Reassuring depositors, both domestic and expatriate, who have suffered massive losses over recent years, is another pressing issue. These losses were exacerbated by the inability of successive governments to implement a comprehensive rescue plan addressing the $72 billion financial gap fairly. The situation was worsened by mismanagement in the electricity sector and the squandering of over $20 billion in central bank reserves following the onset of the financial crisis.

In response to Aoun’s commitment to a fair resolution for depositors, the Association of Banks in Lebanon welcomed his emphasis on safeguarding deposits. It also expressed its readiness to collaborate with the central bank and the government to protect depositors’ rights, citing a recent State Council ruling that prohibits any financial recovery plans from including measures that would erode depositors’ funds.

In its final session, the caretaker government addressed long-standing creditor issues by unanimously agreeing to suspend Lebanon’s right to invoke statutes of limitations on claims by foreign bondholders under New York law. This suspension, effective until March 9, 2028, aims to facilitate future negotiations.

With this decision, the caretaker government tacitly acknowledged Lebanon’s pending debt obligations, including over $10 billion in suspended interest payments on Eurobonds and approximately $30 billion in principal debt. The resolution now awaits direct negotiations under the new administration, which faces the challenge of resolving a nearly five-year-old crisis triggered by the previous government’s uncoordinated decision to halt payments on all Eurobond obligations through 2037.

Caretaker Finance Minister Youssef Khalil emphasized that despite the difficult circumstances, “Lebanon remains committed to reaching a fair and consensual resolution regarding the restructuring of Eurobond debt.”