BP expects net debt to fall to as low as $13.5B, hitting its 2027 target a year early

BP $BP said Tuesday that its net debt at the end of the third quarter is expected to fall to between $13.5 billion and $14.5 billion, reaching its 2027 target range of $14 billion to $18 billion a year ahead of schedule, according to Bloomberg.

The reduction from $22.3 billion at the end of the second quarter was driven in part by strong oil and gas trading results, the company said. The gas marketing and trading result is expected to be significantly higher compared with the second quarter. The oil trading result is expected to be broadly flat. Brent crude averaged $96.99 per barrel in the third quarter, down from $103.85 per barrel in the prior quarter, while the BP Refining Indicator Margin averaged $46.7 per barrel, up sharply from $29.6 per barrel in the second quarter.

Other factors affecting net debt in the quarter include the redemption of $1 billion in hybrid securities on September 30, capital expenditure of around $3 billion, higher income taxes paid of around $1 billion, and working capital release in the range of $0 to $1 billion, the company said. Overall, BP expects the combined total of net debt, hybrid bonds, leases, and Gulf of America settlement liabilities to fall by around $9 billion to $10 billion compared with the second quarter.

BP also said third-quarter results are expected to include post-tax adjusting items for impairments in the range of $3 billion to $4.5 billion, primarily attributable to transition businesses in the gas and low carbon energy segment. Those charges are excluded from the company's underlying replacement cost profit measure. BP is scheduled to publish its full third-quarter results on October 30.

CEO Meg O'Neill, who joined BP in April as the first outsider ever tapped for its top role, has moved to strengthen the balance sheet through asset sales and cost discipline. During the second quarter, BP announced plans to divest Archaea Energy, completed the sale of its Gelsenkirchen refinery in Germany, and said it planned to sell its North Sea business.

Speaking at the Energy Intelligence Forum in London earlier this month, O'Neill acknowledged that BP had not been careful stewards of shareholder capital and said debt reduction would remain the priority. She declined at that time to say when BP would resume share repurchases, which were suspended so the company could pay down debt.

BP stock ticked into positive territory Tuesday.