In a classic “good news, bad news” update, BP announced that its net debt has dropped to between $22 billion and $23 billion, even as it prepares to take a $5 billion hit on its green energy business. The debt reduction is a significant achievement, bringing liabilities down from $26 billion in the previous quarter.
The “bad news” comes in the form of massive writedowns on the company’s transition assets. The firm is devaluing its gas and low-carbon divisions as it pivots back to fossil fuels. This involves cancelling hydrogen projects and seeking to sell solar assets, effectively admitting that these investments have underperformed.
The company also warned of operational challenges. Oil trading performance was weak in the fourth quarter, and crude prices have slumped. The combination of these factors is expected to result in a muted set of full-year results in February.
However, the aggressive debt reduction suggests that the company is prioritizing financial health over expansion. This conservative approach is likely intended to prepare the ground for incoming CEO Meg O’Neill, giving her a stable platform from which to operate.
The broader energy sector is seeing similar moves towards consolidation and caution. With deals collapsing and rivals issuing profit warnings, this British giant’s focus on debt reduction and core assets appears to be a prudent response to an uncertain market.