BP has forecast stronger refining profits and a sharp reduction in net debt for the third quarter, while warning of impairment charges of up to $4.5bn (£3.4bn) as new CEO Meg O’Neill prepares to unveil an updated strategy in December.

The FTSE 100 oil major said its indicative refining margin rose to $46.70 a barrel from $29.60 in the second quarter, boosting expectations for underlying profit in its products division by $1.9bn to $2.1bn. Gas marketing and trading results are also expected to be significantly higher, while oil trading performance is forecast to remain broadly unchanged.

Upstream production is expected to be between 2.19 million and 2.24 million barrels of oil equivalent a day, broadly in line with the previous quarter. BP said gas and low-carbon energy production would increase, partly offsetting lower output from its oil operations.

Net debt is expected to fall to between $13.5bn and $14.5bn at the end of September, from $22.3bn three months earlier. The reduction reflects factors including the release of working capital and other cash movements, although BP also expects to pay around $1bn more in income taxes and spend approximately $3bn on capital expenditure.

However, third-quarter results will include post-tax impairment charges of between $3bn and $4.5bn, primarily relating to transition businesses within its gas and low-carbon energy division. The charges will be excluded from underlying replacement cost profit.

The petro giant said O’Neill, who was appointed CEO in early April, would present a strategy and outlook update in New York on 15 December, setting out the company’s future direction. The group is scheduled to publish its third-quarter results on 30 October.

BP shares were up 1.1% at 594.4p on Tuesday morning trading.

Dan Coatsworth, head of markets at AJ Bell, said: The sharp rise in oil and gas prices this year has created a major tailwind for BP’s earnings. Against a backdrop of heightened volatility in the energy markets, BP has shown remarkable resilience with its upstream production and tightened its third quarter guidance with a higher bottom end and only a marginal narrowing of the top end.

“Guidance for up to $4.5 billion of impairments takes the shine off the results somewhat. This is linked to its low-carbon business, which is no longer a strategic priority for the group. BP has scaled back its low carbon and green energy strategy to focus on traditional oil and gas, so the impairment charge is unlikely to ruffle any feathers with investors.”

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