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BP Forecasts Debt Increase and Gas Output Decline in Latest Trading Update
Energy giant BP anticipates a rise in net debt and a decrease in gas production for the first quarter of 2025.
The oil and gas supermajor projects its net debt will be approximately $4 billion (£3.1 billion) higher by the end of the first quarter compared to the end of 2024, when it stood at $23 billion. This update comes as investors closely monitor BP’s financial strategy and energy production outlook.
Factors Contributing to Debt Increase
The FTSE 100 listed company attributed the anticipated debt increase partly to the timing of payments related to:
- Bonuses
- Sales of low-carbon assets
- Seasonal inventory effects
Production Outlook: Gas Output to Fall
BP further expects its upstream production to be lower, primarily due to a decline in gas and low carbon energy output. This reduction is a consequence of recent divestments in Egypt and Trinidad & Tobago.
In Trinidad & Tobago, BP divested four mature offshore gas fields and related production facilities to Perenco T&T in December of last year.
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While the company forecasts a slight increase in oil output, it anticipates the gas marketing and trading performance to be “weak.”
Customers and Products Division
For its customers and products division, BP cautioned that trading results would be negatively impacted by reduced seasonal volumes. However, the company expects refining margins to be stronger in this division.
Leadership Change and Strategic Shift
This trading update follows the recent announcement that BP’s chairman, Helge Lund, will step down. Lund’s departure comes amidst ongoing investor criticism regarding the company’s strategic direction. It is anticipated that Lund will leave his position sometime in 2026.
Lund, who is 62, became chairman in 2019, bringing with him experience from leadership roles at BG Group, Statoil (now Equinor), and Aker Solutions, a Norwegian engineering firm.
During his tenure as chairman, BP’s share price has fallen by approximately one-third. This decline occurred after a strategic shift towards green energy initiatives, championed by former chief executive Bernard Looney, that ultimately did not meet expectations.
Renewed Focus on Oil and Gas
In late February, BP revealed a significant strategic adjustment, informing investors of plans to decrease annual investment in renewables by almost three-quarters.
Conversely, yearly spending on oil and gas production is set to increase by around 20 percent, reaching $10 billion (£7.9 billion).
Prior to this revised strategy, BP had already abandoned a target to reduce oil output, suspended all new offshore wind projects, and scaled back its emissions reduction targets.
Despite the renewed emphasis on fossil fuels, some shareholders, notably activist investor Elliott Management, which holds a 5 percent stake in BP, continue to express criticism.
Oil Price Volatility
Adding to the complex economic landscape, oil prices have experienced a significant decrease in recent weeks. This downturn coincides with the implementation of tariffs on imported US goods, initiated by President Donald Trump, which has unsettled markets and intensified concerns about a potential global recession.
Brent Crude is currently priced at $63.29 per barrel, a decrease from nearly $75 prior to President Trump’s recent address.
BP shares experienced a decrease of 1.65 percent, trading at 335.95p in late Friday morning trading.