BP expects to take between $3 billion and $4.5 billion in post-tax impairment charges in the third quarter of 2026, primarily related to its energy transition businesses, even as stronger refining margins provide a significant earnings boost. The British energy major said Tuesday that the write-downs would largely affect assets within its gas and low-carbon energy division. The charges will be excluded from underlying replacement cost profit, a key measure of BP's operating performance. Despite the impairments, BP expects its refining business to benefit from a $1.9 billion to $2.1 billion improvement in realized refining margins compared with the second quarter.

The company's refining indicator margin climbed to $46.70 per barrel during the third quarter, up from $29.60 in the preceding three months, highlighting the improved profitability of processing crude into fuels. The stronger refining environment comes despite a decline in benchmark oil prices. Brent crude averaged $96.99 per barrel in the third quarter, compared with $103.85 in the second quarter. Lower oil prices are expected to reduce BP's upstream earnings by approximately $200 million to $400 million through weaker realizations.

Meanwhile, improved gas realizations could contribute an additional $100 million to $300 million, with gas marketing and trading results expected to be significantly stronger than in the previous quarter. BP also expects a substantial improvement in its balance sheet, forecasting third-quarter net debt of between $13.5 billion and $14.5 billion, down from $22.3 billion at the end of June. The company expects its broader measure of obligations, including net debt, hybrid securities, leases and Gulf of America settlement liabilities, to decline by approximately $9 billion to $10 billion quarter over quarter.

BP redeemed $1 billion in hybrid securities during September and expects third-quarter capital expenditure of approximately $3 billion. On the production side, BP forecasts upstream output of between 2.19 million and 2.24 million barrels of oil equivalent per day, compared with 2.201 million in the second quarter. The expected production performance reflects a recovery from seasonal maintenance, partly offset by BP's reduced ownership interests in Latin America and continued operational disruptions in the Middle East. Refinery throughput is expected to decline to between 1.375 million and 1.405 million barrels per day, partly reflecting the completion of the Gelsenkirchen refinery divestment in Germany on July 31.

BP's customer-facing businesses are expected to report significantly weaker results, pressured by lower fuel margins, higher base oil costs at Castrol and reduced contributions from midstream operations. The trading update underscores the contrasting pressures facing integrated oil companies, with elevated refining margins supporting earnings while weaker crude prices weigh on upstream profitability. For BP, the anticipated impairments also highlight the financial challenges associated with its energy transition portfolio as the company continues reshaping its asset base and capital allocation priorities.

BP is scheduled to report its full third-quarter results on October 30, followed by a strategy and outlook update in New York on December 15. By Charles Kennedy for Oilprice.com More Top Reads From Oilprice.com Oil Prices Retreat as Saudi Arabia Pledges to Keep Exports Flowing Black Sea Oil Shipping Insurance Costs Surge to $2.5 Million Supertanker Rates Slip From Record Highs Oilprice Intelligence brings you the signals before they become front-page news. This is the same expert analysis read by veteran traders and political advisors. Get it free, twice a week, and you'll always know why the market is moving before everyone else.

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