- BP said it expects to undertake a huge reduction in asset value in the range of $13 billion to $17.5 billion as the energy giant revised its long-term energy price assumptions.
- After weighing its ambitions to transition to a net-zero carbon company by 2050 and the impact of the COVID-19 pandemic, BP said it expects Brent crude to average around $55 per barrel from 2021 through to 2050, and Henry Hub gas prices to fall to $2.90.
- Last week, BP announced it would slash 10,000 jobs in an effort to cope with the global collapse in demand for oil.
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Oil major BP said on Monday that it expects to take a hit of up to $17.5 billion on the value of its assets as the company adjusts to the new reality of the energy industry during the coronavirus era.
"We have been reviewing our price assumptions over a longer horizon," BP's chief executive Bernard Looney said in a statement. "That work has been informed by the COVID-19 pandemic, which increasingly looks as if it will have an enduring economic impact."
BP said its transformed price outlook is based on the likelihood of a global transition toward carbon-efficient fuels leading to a "Paris-consistent world" — referencing the Paris climate agreement — and the ongoing impact of the pandemic.
The energy giant expects global benchmark Brent crude to average a price of around $55 per barrel from 2021 through to 2050. That's a reduction of 27% from its previous expectation. Henry Hub gas price forecasts are down 31% to $2.90, when compared to its end-2019 outlook.
Henry Hub, located in Louisiana, serves as the official delivery location for futures contracts on the New York Mercantile Exchange. It has access to major US gas markets.
BP said the new long-term price assumptions will impact some of the group's exploration plans.
As a result of a strategic shift, it expects to incur exploration charges, non-cash and post-tax impairment write-offs in the range of $13 billion to $17.5 billion in the second quarter.
More details are expected to be provided in BP's second quarter results, which it will release on August 4.
BP's shares were down 4.5% in early European trading.
Last week, CEO Bernard Looney told employees that BP would cut 10,000 office-based jobs, or about 15% of the company's staff, while "protecting the frontline of the company."
Employees were earlier warned that there would be no pay raises in 2020, but Looney confirmed the company would proceed with pay upgrades beginning October 1 for employees up to mid-level management.
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