BP Stumbles: Weak Oil Trading, Refining Margins Drag Down Q2 Outlook

BP p.l.c. BP shares are trading lower after the company disclosed the trading update for the second quarter of FY24, with oil trading results expected to be weak after a strong first quarter.

In the oil production and operations segment, the company anticipates realizations to have a favorable impact of $0.1 billion-$0.3 billion versus the first quarter, factoring in the effects of price lags on production in the Gulf of Mexico and the UAE.

The British oil giant expects Upstream production in the quarter to remain flat compared to the prior quarter, with stable oil production and a slight decrease in gas and low-carbon energy output.

Also Read: Is BP Bailing on Green? Reportedly Shifts Gears From Renewables To Oil And Gas

In the gas and low-carbon energy segment, the company projects realizations to have an adverse impact of about $0.1 billion vs the prior quarter, including declines in non-Henry Hub natural gas prices.

Also, the gas marketing and trading result is expected to be average in the second quarter following a strong first quarter.

BP projects lower refining margins to negatively impact to have a negative impact of $0.5 billion-$0.7 billion owing to weaker middle distillate margins and narrower North American heavy crude oil differentials, along with increased turnaround activity.

Apart from this, the company disclosed that second-quarter results are expected to include post-tax adverse adjustments of $1.0 billion-$2.0 billion on asset impairments and onerous contract provisions, including charges related to the Gelsenkirchen refinery review.

Last month, BP agreed to purchase Bunge Global SA’s BG 50% stake in their joint venture, BP Bunge Bioenergia S.A., for an enterprise value of about $1.4 billion.

Related: BP Eyes Biofuel Dominance In Brazil With Expansion Plans: Report

Investors can gain exposure to the stock via Direxion Hydrogen ETF (ARCA: HJEN) and First Trust Exchange-Traded Fund IV FT Energy Income Partners Strategy ETF (ARCA: EIPX).

Price Action: BP shares are down 3.99% at $35.08 premarket at the last check Tuesday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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