ii view: BP details $1bn write-down from low-carbon business

Photo: Cheng Xin/Getty Images.

Second-quarter trading update to 30 June

• $1 billion write-down of gas and low-carbon business
• Expected upstream production of 2,170 to 2,220 million barrels of oil equivalent per day (boe/d), down from 2,339 million boe/e in Q1
• Expects net debt of between $22-$23 billion, down from Q1’s $25.3 billion

ii round-up:

Under relatively new head Meg O’Neill, BP (LSE:BP.) today detailed a $1 billion (£748 million) write-down of its gas and low-carbon business as the energy major continued a pivot back to its core oil and gas operations.

The charge is excluded from second-quarter underlying adjusted replacement profits, scheduled for 6 August, and follows up to $5 billion of low carbon related write-downs made earlier in the year.

Lower Q2 production compared to Q1 given Gulf of America maintenance and disruption from the war in the Middle East, sit alongside expected higher oil and gas realisation or sale prices.

Against a backdrop of renewed Middle East tensions and a rising oil price, BP shares gained 2% in UK trading having come into this latest news up around 17% so far in 2026. That’s similar to rival Shell (LSE:SHEL). The FTSE 100 index is up by close to 5%, while the price of oil is up around 40% year-to-date.

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Expected second-quarter upstream production of between 2,170 and 2,220 million boe/d is down from 2,339 million boe/e in Q1.

Expected group net debt of around $22-$23 billion at the end of the second quarter is down from $25.3 billion in Q1.

Forecast sale and other proceeds for the full year 2026 of between $9-$10 billion includes $6 billion from the previously announced Castrol oil business disposal.  

ii view:

Commencing operations in Iran in 1901, BP today operates in more than 60 countries. Oil production and operations generated most profits at close to half during the group’s last financial year. That was followed by gas and low-carbon energy at around a third, with customer and products or the downstream forecourt retailing business the balance of almost a fifth.  

A refocus towards higher-profit fossil fuels and away from low-carbon arenas likely won’t please all investors, with climate change concerns remaining. Sales of assets such as the Castrol lubricant business mean a reduced diversity of assets and profit-generating centres. Changes in strategy and a push to reduce net debt previously saw the share buyback programme suspended, while elevated energy prices impacting inflation may keep interest rates higher for longer, potentially hindering future energy demand.

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More favourably, a concentration on more profitable businesses continues. More than 10 exploration discovery successes during 2025 underline the emphasis on operational improvement. A push towards a simpler business and resultant disposals continue to see group net debt falling, while shareholder returns remain important given the ongoing payment of a dividend.

On balance, and while the volatility of energy prices cannot be overlooked, an estimated future dividend yield of around 5% will keep many investors interested.

Positives:

• Focus on increased efficiency
• Attractive dividend yield (not guaranteed)

Negatives:

• Climate change concerns persist
• Uncertain economic outlook

The average rating of stock market analysts:

Strong hold