BP Anticipates Q2 Earnings Dip Amid Weak Refinery Performance

BP anticipates a decline in second-quarter profits due to underperformance in its oil refining segment, with losses estimated at up to $700 million. This follows similar warnings from ExxonMobil. BP's refining margins are expected to be weak, partly due to high costs and lower fuel demand, prompting plans to reduce refining operations in Germany. Overall, BP's earnings may be impacted by lower oil and trading profits, as well as a potential $1.5 billion write-down for a German plant.

BP, a leading international oil and gas company, announced on Tuesday that it anticipates a decline in its second-quarter profits, with potential losses reaching up to $700 million [1]. This negative outlook follows similar warnings from ExxonMobil, which projected a potential hit of $1.5 billion due to weak refining margins [1].

BP's refining margins have shown signs of weakness, prompted by high costs and lower fuel demand [1]. As a result, the company plans to reduce refining operations in Germany, aiming to mitigate losses [1]. Additionally, BP expects to take an impairment of up to $1.5 billion for a German plant, which includes ongoing review costs of its Gelsenkirchen refinery [2].

The root cause of these margin pressures can be attributed to a surge in renewable diesel supply, which has led to a decline in diesel prices and, subsequently, slumping refining margins [1]. Market analysts at Fitch believe that this trend will persist, posing a significant challenge to refiners in the near future [1].

BP's share price reacted negatively to this news, with shares falling by 2% on Tuesday [2]. Despite a strong first-quarter performance driven by robust refining margins, the company now faces the prospect of lower oil and trading profits, compounded by potential impairment charges [1].

In conclusion, BP's second-quarter earnings will likely be impacted by a combination of factors, including weak refining margins, high costs, lower fuel demand, and potential impairment charges. These challenges underscore the ongoing challenges facing the global oil and gas industry in an increasingly competitive and complex market environment.

References:
[1] BP joins Exxon in saying weak refining margins will hit second-quarter profits. (2023, May 23). MarketWatch. https://www.marketwatch.com/story/bp-joins-exxon-in-saying-weak-refining-margins-will-hit-second-quarter-profits-1fa0d98b
[2] BP shares drop 3 after warning of up to $2 billion impairment, weak refining margins. (2023, May 23). NBC Connecticut. https://www.nbcconnecticut.com/news/national-international/bp-shares-drop-3-after-warning-of-up-to-2-billion-impairment-weak-refining-margins/3330712/