BP has formally devalued its “transition business,” announcing a writedown of up to $5 billion as part of a strategic pivot back to fossil fuels. The impairment charges apply to the company’s gas and low-carbon energy divisions, signaling that these areas are no longer the primary focus of the firm’s growth strategy.
The move involves tangible cuts to the company’s green portfolio. Hydrogen projects in the UK, Oman, and Australia have been cancelled, and the solar business Lightsource is up for partial sale. These decisions reverse the diversification efforts of previous years.
The company’s financial update also warned of weak performance in oil trading. This comes as crude prices have fallen to their lowest levels in years, driven by oversupply concerns. The company expects these factors to result in a “downbeat” earnings report next month.
However, the company offered reassurance on its debt position. By reducing net debt to between $22 billion and $23 billion, the firm is demonstrating fiscal responsibility. This deleveraging is seen as a necessary step to stabilize the company during its strategic realignment.
With incoming CEO Meg O’Neill set to arrive in April, the devaluation of the transition business clears the way for a new direction. The company is betting that a streamlined, fossil-fuel-focused operation will deliver better returns for shareholders in the long run.
25