Core Viewpoint - The company warns of weakened profit outlook for Q4 2025 due to weak oil and gas product prices, poor trading performance, and significant impairment losses related to energy transition [1][5] Group 1: Upstream Business Performance - The company expects upstream production to remain stable compared to the previous quarter, with oil production steady but declines in natural gas and low-carbon energy output offsetting this stability [1][5] - Actual prices for commodities in the upstream segments are expected to decline, negatively impacting core reset cost profits [1][5] - The decline in natural gas prices is projected to reduce core profits by $100 million to $300 million, while the oil production segment may see profit reductions of $200 million to $400 million due to price lag effects [1][6] Group 2: Downstream Business Performance - The downstream business shows mixed results, with consumer business sales expected to decline due to seasonal factors, while fuel margins are anticipated to remain stable [2][6] - Refining business profit margins have improved, contributing approximately $100 million in gains, but these gains will be offset by frequent maintenance activities and temporary capacity losses from a fire at a refinery [2][6] - Oil trading performance is expected to be weak [2][6] Group 3: Impairment Losses and Financial Health - The company anticipates recording after-tax adjusted charges of $4 billion to $5 billion in Q4, primarily related to energy transition businesses and equity-accounted joint ventures [2][6] - Despite profit pressures, the company's balance sheet has improved significantly, with net debt expected to decrease to $22 billion to $23 billion by the end of Q4, down from $26.1 billion at the end of Q3 [2][7] - The company achieved approximately $3.5 billion in asset sales during the quarter, leading to total asset sale proceeds of about $5.3 billion for the year, exceeding the previous target of over $4 billion [2][7] Group 4: Tax Guidance and Strategic Challenges - The company updated its annual tax guidance, projecting the effective tax rate to rise from approximately 40% to around 42%, influenced by changes in profit distribution [3][7] - The statement highlights the strategic dilemma faced by the company in balancing cash flows from traditional oil and gas operations with the capital-intensive and increasingly volatile energy transition strategy [3][7] - Despite stable upstream production and ongoing asset divestitures improving the balance sheet, the weak trading environment and substantial impairment losses indicate continued profit volatility during the company's portfolio restructuring process [3][7] Group 5: Upcoming Financial Reporting - The company is scheduled to release its complete Q4 2025 and annual performance report on February 10, 2026 [4][7]

Group 1 - Berenberg has lowered the target price for BP from 525 pence to 520 pence [1]

Core Viewpoint - BP p.l.c. anticipates a weaker earnings environment in Q4 2025 due to lower oil and gas realizations, weak trading performance, and significant impairments related to its transition efforts, despite improvements in its balance sheet from asset sales [1] Group 1: Earnings Outlook - The company expects upstream production in Q4 to remain flat compared to the previous quarter, with stable oil production offset by declines in gas and low-carbon output [2] - Lower commodity realizations in both upstream segments are projected to negatively impact underlying replacement cost (RC) profit [2] Group 2: Gas and Low-Carbon Energy - Realizations in gas and low-carbon energy are anticipated to decrease underlying profit by $100 million to $300 million quarter-on-quarter, influenced by changes in global gas pricing benchmarks [3] - Gas marketing and trading results are expected to be average, providing minimal offset to the declines [3] Group 3: Oil Production - Oil production is expected to face a more significant impact, with realizations likely to reduce profit by $200 million to $400 million, partly due to price lags affecting production in the Gulf of America and the UAE [4] - Brent crude averaged $63.73 per barrel in the quarter, down from $69.13 per barrel in Q3 [4] Group 4: Downstream Performance - Downstream performance is mixed, with seasonally lower volumes in the customer business and flat fuel margins expected [5] - Stronger realized refining margins are projected to contribute around $100 million, but this will be offset by increased turnaround activity and temporary capacity loss due to a fire at BP's Whiting refinery [5] Group 5: Impairments - The most significant impact is expected from impairments, with BP forecasting post-tax adjusting charges of $4 billion to $5 billion in Q4, primarily related to its energy transition businesses [6] - These impairments will be excluded from underlying RC profit but highlight the financial pressures on BP's low-carbon portfolio amid changing market conditions [6] Group 6: Balance Sheet Improvement - Despite the earnings challenges, BP is reporting substantial progress in its balance sheet, with net debt expected to decrease to $22 billion–$23 billion by the end of Q4, down from $26.1 billion at the end of Q3 [7] - This reduction is attributed to approximately $3.5 billion in divestment proceeds during the quarter, bringing total asset sales for the year to about $5.3 billion, exceeding earlier guidance of over $4 billion [7]

Core Insights - BP announced a $4–$5 billion hit to its Q4 earnings due to winding down its energy transition business, following Ford's announcement of $19.5 billion losses from curtailed EV plans, indicating broader struggles in the energy transition sector [1][2] Group 1: Company-Specific Developments - BP's low-carbon business has underperformed, leading to plans to exit Lightsource BP and divest from its onshore wind power business in the U.S., with impairment charges reported at $5.7 billion in 2023, $5.1 billion in 2024, and a total of $6.9 billion for 2025 [2] - Shell is also reducing its presence in the energy transition space, suspending a biofuels plant in the Netherlands and reporting an impairment of $800 million to $1.2 billion from its low-carbon business [3] Group 2: Industry Trends - The energy transition industries, once seen as profitable investments, are facing skepticism as major companies like Ford, BP, and Shell express doubts about their viability without subsidies [4] - While global low-carbon energy investment reached an all-time high in the first half of 2025, specific investments in utility-scale solar power and onshore wind have declined, particularly in Europe, where growth has slowed due to economic pressures [5]

Industry Overview - The Zacks Oil and Gas Integrated International industry includes companies involved in upstream, midstream, and downstream operations across various regions including the U.S., Asia, South America, Africa, Australia, and Europe [3] - Integrated energy firms are increasingly focusing on renewable energy to lower emissions and carbon intensity [3] Current Challenges - Rising oil inventories are expected to negatively impact crude prices, which will affect exploration and production operations of integrated energy players [1] - The EIA projects the average spot price for West Texas Intermediate crude to be $52.21 per barrel in 2026, down from $65.40 per barrel in 2025, indicating a potential decline in cash flows for upstream businesses [4] - A slowdown in oil production growth in the U.S. is driven by shareholder demands for capital returns rather than production expansion, leading to reduced revenues [5] - Growing demand for renewable energy is expected to decrease reliance on oil and natural gas, adversely impacting integrated energy firms focused on fossil fuels [6] Industry Performance - The Zacks Oil and Gas Integrated International industry has a Zacks Industry Rank of 233, placing it in the bottom 5% of over 250 Zacks industries, indicating bearish prospects [7][8] - Over the past year, the industry has outperformed the broader Zacks Oil - Energy sector with a rally of 13.9%, but underperformed the S&P 500, which surged by 21.5% [9][10] Valuation Metrics - The industry is currently trading at a trailing 12-month EV/EBITDA ratio of 5.22X, lower than the S&P 500's 19.04X and the sector's 5.55X [13] - Historically, the industry has traded between 2.79X and 6.61X over the past five years, with a median of 4.18X [14] Key Companies - Chevron Corporation (CVX) is well-positioned in the Permian Basin and benefits from a stable business model and softer oil prices, holding a Zacks Rank of 3 [21] - BP plc (BP) anticipates strong demand for oil and natural gas, benefiting from its upstream activities and refining operations, also holding a Zacks Rank of 3 [17] - Petrobras (PBR) has lower breakeven costs and lifting costs, positioning it favorably in a soft crude pricing environment, with a Zacks Rank of 3 [19]

Core Insights - BP p.l.c. and Corteva, Inc. have established a 50-50 joint venture named Etlas to cultivate crops for extracting oils to be refined into sustainable aviation fuel (SAF) and renewable diesel (RD) [1][7] - Following the announcement of the joint venture, BP's share price increased by 4.25%, rising from $34.36 to $35.82 per barrel [1] Company and Industry Summary - The joint venture combines Corteva's seed technology and agricultural innovation with BP's refining and fuel marketing capabilities, aiming to scale the production of vegetable oils from crops such as canola, mustard, and sunflower to meet the growing global demand for SAF and RD [2] - The strategy involves utilizing existing farmland between food crop cycles to cultivate crops for low-carbon fuel production, thereby improving soil health and providing additional income opportunities for farmers without requiring more land [3] - The Etlas joint venture is expected to commence supply in 2027, targeting an annual production of 1 million metric tons of feedstock by the mid-2030s, which is projected to generate over 800,000 tons of biofuel [4][7] - This initiative aligns BP and Corteva's business models with the global transition towards cleaner fuels while also creating potential future cash flow [4]

Group 1 - More than 20 investors and the climate activist shareholder group Follow This have jointly filed resolutions with BP and Shell [1] - The resolutions call for the oil and gas giants to disclose their strategies regarding climate change [1]

Core Viewpoint - The company has been a leader among oil majors in transitioning its business from fossil fuels to renewable energy sources [1] Group 1 - The company is recognized for its proactive approach in shifting its business model [1]

Core Viewpoint - BP expects to report a post-tax asset impairment loss of $4 billion to $5 billion in its fourth-quarter financial results, primarily affecting its natural gas and low-carbon energy segments [1] Group 1 - The impairment loss is attributed mainly to the natural gas and low-carbon energy business segments [1] - The impairment will not impact the core earnings metrics based on reset cost profits [1]

Core Viewpoint - BP expects to report a post-tax asset impairment loss of $4 billion to $5 billion in its fourth-quarter financial results, primarily affecting its natural gas and low-carbon energy segments [1] Group 1 - The impairment loss is attributed mainly to the natural gas and low-carbon energy business segments [1] - The impairment will not affect the core earnings metrics based on reset cost profits [1]