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BP’s fourth quarter results to show a big business in transition

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Like a number of evolving major carbon businesses BP PLC (LON:BP) will continue to walk a tightrope on Tuesday, as it tries to keep shareholders engaged in today’s business whilst painting a greener picture of the future.

As BP releases fourth quarter results there will be plenty of eyeballs on strategy and the proposed diversification into alternative and renewable energy businesses.

The update comes nearly a year since Bernard Looney took the reigns as chief executive just under a year ago.

Looney has been steering the group into an ambitious and radical repositioning. In August, he laid out a reimagining of its business as an integrated energy company with the hydrocarbons business cut by around 40% over the next ten years.

Looney unveiled a US$5bn per year investment plan, targeting a 20-fold increase in renewable energy capacity along with goals to capture a piece of the emerging hydrogen and bioenergy markets.

Oil business today

Amidst the pandemic and the crude price volatility, it has been a tough period for BP.

“Sentiment has not been helped by a dividend cut, heavy losses in the second quarter and break-even result in the third, thanks in part to weak commodity prices and in part to US$22bn of asset impairments and write-downs relating to the value of exploration assets in Angola, Brazil, Egypt, Canada and the Gulf of Mexico,” AJ Bell analyst Russ Mould said in a note.

“The write-downs have only stoked fears that BP may be left sat on stranded assets and that its US$82bn net asset (or equity) value may still be too high.”

Recent reports of an exodus out of BP’s exploration department – which is now said to have less than 100 staff compared to 700 – is a sign of these transitory times for both BP and the wider industry.

“Investors will also look for further evidence of the pivot from being an integrated oil firm to an integrated energy company after BP’s entry into offshore wind via a strategic partnership with Equinor and recent contract wins for Chargemaster. The company also has exposure to biofuels in Brazil and solar energy via BP Lightsource,”

“Near-term financial performance, however, will still be driven by upstream (production and exploration) and downstream (refining and petrol stations).”

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