Oil giant BP announced multibillion-dollar writedowns on its assets. The main reason is a revision of the strategy in favor of traditional oil and gas under the new leadership of the company.
British energy company BP is preparing for large financial write-downs in the fourth quarter. Their amount will be from 4 to 5 billion dollars. Most of the losses stem from the revaluation of low-carbon energy assets as the company changes its priorities.
BP’s new management, including chairman Albert Manifold, has announced a strategic pivot. Instead of investing in green energy, the focus is shifting to oil and gas sector to increase profitability. A year ago, the company had already sharply reduced spending on the energy transition – from $7 billion to a maximum of $2 billion.
As part of this course, BP began to divest a number of assets. The company wants to sell its stake in solar energy group Lightsource bp, has spun off its offshore wind business into a joint venture and abandoned plans to build biofuels and hydrogen plants.
Analysts regard large-scale write-offs as a step by the new management to “clean up” the balance sheet before changing its strategy. This could lead to further measures, such as reducing the share repurchase program.
In parallel with the revaluation of assets, BP expects profit to decline in the fourth quarter due to weak oil trading results and falling energy prices. At the same time, the company’s net debt is being reduced due to the sale of non-core assets, including a stake in the production of Castrol lubricants.
BP’s decision to write off billions of dollars in low-carbon energy costs marks a cautious approach to the energy transition. The company’s strategy is shifting towards guaranteed profits from traditional energy sources, which reflects the general trend in oil and gas industry.
Source: Reuters
