BP's Strategic Shift: A $5 Billion Write-Down and a Focus on Fossil Fuels
BP is set to take a significant hit of up to $5 billion on green energy as it refocuses its efforts on fossil fuels under the leadership of its new chair, Albert Manifold. This strategic shift comes with a price, as the company expects to write down the value of its struggling green energy business by a substantial amount. The oil giant's transition businesses, particularly its gas and low-carbon energy divisions, are undergoing a reevaluation, with a potential write-down of between $4 billion and $5 billion. Despite this, BP assures that this adjustment will not impact its underlying profits when it reports its full-year results in February.
The company's recent actions include attempting to sell a stake in its solar business, Lightsource, and canceling hydrogen projects in the UK, Oman, and Australia. These moves reflect BP's growing emphasis on fossil fuels, a shift that has been criticized by some as a retreat from its green ambitions. The company's shares experienced a brief dip of 1.4% on Wednesday morning, partially recovering later, as it also reported weaker oil trading during the final quarter of the year.
This development comes on the heels of a similar warning from BP's FTSE 100 rival, Shell, regarding a weaker performance in trading due to a drop in oil prices. The average price of Brent crude in the fourth quarter of last year was $63.73 per barrel, down from $69.13 in the previous quarter. Oil prices last year witnessed their steepest annual decline since the Covid pandemic, falling by nearly 20% in 2025, and further decreases are anticipated as producers continue to exceed the crude demand of the global economy.
In recent weeks, oil prices have faced additional pressure following Donald Trump's capture of Venezuela's leader, Nicolás Maduro, and his claims about US oil companies' potential to rebuild Venezuela's oil industry. This has heightened concerns about a potential oil glut. However, oil prices rose on Wednesday due to fears of Iranian supply disruptions caused by a potential US attack and possible retaliation, with Brent futures increasing by 1.4% to $66.39.
BP's financial update reveals a continued focus on debt reduction, with net debt reduced to between $22 billion and $23 billion at the end of the quarter, down from $26 billion in the previous three months. This strategic move comes after BP's surprise appointment of Meg O'Neill as its third chief executive in five years, making her the first female head of a leading oil company. O'Neill will join BP in April from the Australian oil and gas company Woodside, replacing Murray Auchincloss, who held the position for less than two years.
The write-down and strategic shift have sparked discussions about BP's future direction. Dan Coatsworth, the head of markets at the broker AJ Bell, suggests that the upcoming quarterly results will likely be downbeat, providing O'Neill with a challenging yet manageable base. This transition comes as Shell and Exxon Mobil announced the termination of a planned sale of natural gas assets in the North Sea to Viaro Energy, citing changed commercial and market conditions.
