Business Context and Reporting Period
Company: BP p.l.c.
Filing Type: Form 6-K (Report of Foreign Issuer)
Reporting Period: Second Quarter 2024 (ended July 9, 2024)
Context: This document is a trading statement providing current estimates and expectations for Q2 2024 performance. It is not a comprehensive financial report; final results are expected to be published on July 30, 2024.
Key Financial Metrics and Trading Conditions
Trading Conditions:
- Brent Crude: Averaged $84.97/bbl in Q2 2024 (vs. $83.16/bbl in Q1 2024).
- US Gas (Henry Hub): Averaged $1.89/mmBtu in Q2 2024 (vs. $2.25/mmBtu in Q1 2024).
- Refining Marker Margin: Averaged $20.6/bbl in Q2 2024 (unchanged from Q1 2024).
Segment Performance Estimates (vs. Prior Quarter):
- Upstream Production: Expected to be broadly flat overall. Oil production & operations flat; Gas & low carbon energy slightly lower.
- Gas & Low Carbon Energy Realizations: Adverse impact of approximately $0.1 billion due to lower non-Henry Hub natural gas prices. Trading result expected to be average.
- Oil Production & Operations Realizations: Favorable impact in the range of $0.1 - $0.3 billion, driven by price lags in the Gulf of Mexico and UAE.
- Customers & Products:
- Customers: Stronger fuels margins, convenience performance, and seasonally higher volumes.
- Products: Significantly lower realized refining margins with an adverse impact of $0.5 - $0.7 billion. Drivers include weaker middle distillate margins, narrower North American heavy crude differentials, and higher turnaround activity. Partially offset by the absence of the Q1 Whiting refinery outage (~$0.5 billion benefit). Oil trading expected to be weak.
Other Items:
- Adjusting Items: Post-tax adverse charges of $1.0 - $2.0 billion related to asset impairments and onerous contract provisions, including the Gelsenkirchen refinery review.
- Gulf of Mexico Oil Spill Payments: Approximately $1.2 billion pre-tax for the full year, with $1.1 billion expected in Q2.
Material Changes vs. Prior Comparable Period
Compared to Q1 2024, the primary material changes include:
- Realizations: A shift from favorable oil price lags to adverse gas price impacts and significantly lower refining margins.
- Refining Operations: The Q1 benefit from the absence of the Whiting refinery outage is now a baseline, while Q2 faces higher turnaround costs and weaker product cracks.
- Impairments: Introduction of significant post-tax adverse adjusting items ($1.0 - $2.0 billion) not present in the same magnitude in the prior quarter.
- Trading Results: Both gas and oil trading results are expected to normalize or weaken following strong Q1 performance.
Guidance, Outlook, and Risks
Updated Guidance (Full Year 2024):
- Upstream Production: Slightly higher than 2023 levels.
- Capital Expenditure: Around $16 billion, split evenly between the first and second half.
- Divestment Proceeds: $2-3 billion, weighted to the second half.
- Underlying Effective Tax Rate: Expected to be around 40%.
- Depreciation, Depletion & Amortization (DD&A): Slightly higher than 2023.
Risks and Contingencies:
- Forward-looking statements are subject to risks including price fluctuations in crude oil and natural gas, currency fluctuations, and supply/demand imbalances.
- Specific risks include the timing of maintenance/turnaround activity, resolution of trading positions, and geopolitical factors (wars, terrorism, cyber-attacks).
- The underlying effective tax rate is sensitive to the geographical mix of profits and losses driven by price volatility.
Investor Verification Checklist
- Final Q2 Results: Verify actual reported figures against these estimates when published on July 30, 2024.
- Impairment Details: Confirm the specific breakdown of the $1.0 - $2.0 billion adverse adjusting items, particularly regarding the Gelsenkirchen refinery.
- Refining Margins: Monitor the impact of North American heavy crude differentials and middle distillate margins on the Products segment.
- Turnaround Activity: Assess the cost and duration of the higher level of turnaround activity mentioned for Q2.
- Oil Spill Payments: Verify the timing and total amount of the $1.1 billion Gulf of Mexico payment in the final cash flow statement.