Coronanvirus: BP to take hit of up to 拢14bn as crisis hits oil demand
The company says it expects the recovery to accelerate the pace of transition to a lower carbon economy and energy system.
Monday 15 June 2020 17:44, UK
BP says it is to take a series of non-cash write downs and charges of up to $17.5bn (拢14bn) as it navigates challenges posed by the coronanvirus crisis.
The oil firm said it had revised down its long-term price assumptions following the collapse witnessed since COVID-19 gripped the global economy this year.
It said the asset value and price review conclusions were also based on expectations that the pandemic's aftermath would accelerate "the pace of transition to a lower carbon economy and energy system".
BP had revealed in February an ambition to become a net zero company by 2050 or sooner amid pressure on the industry to treat tackling climate change as its top priority.
It said on Monday: "As part of its long-term strategic planning, and in the context of its continuing focus on capital discipline, BP is also reviewing its intent to develop some of its exploration intangible assets.
"These actions will lead to non-cash impairment charges and write-offs in the second quarter, estimated to be in an aggregate range of $13bn to $17.5bn post-tax."
BP's new long-term price assumptions were set at an average of around $55 per barrel for Brent crude from 2021-2050.
Its current reserves previously had an assumed value of $75 per barrel.
June contracts for Brent stood at $37 early on Monday morning.
Brent witnessed an intraday fall of more than 3% at one stage as financial markets took fright more widely over fears of a second wave of coronavirus infections - particularly in China where authorities in Beijing have closed a popular consumer goods market following a spike in cases.
BP has lost almost a third of its market value this year to date as investors fret over the damage already done to demand and the world economy. Shares fell by a further 5% in early trading on the FTSE 100 on Monday though later recovered some of that decline.
Chief executive Bernard Looney told investors he expected the impact to be "enduring".
"We have reset our price outlook to reflect that impact and the likelihood of greater efforts to 'build back better' towards a Paris-consistent world.
"We are also reviewing our development plans. All that will result in a significant charge in our upcoming results, but I am confident that these difficult decisions - rooted in our net zero ambition and reaffirmed by the pandemic - will better enable us to compete through the energy transition."