BP has revised its long-term price assumptions after COVID-19 that could lead to impairments of up to $17.5 billion in the second quarter.
UK's BP provided an update on its strategy development that saw it revise its long-term price assumptions after COVID-19 that could lead to impairments of up to $17.5 billion in the second quarter.
In a statement, BP said it has revised its long-term price assumptions, lowering them and extending the period covered to 2050. BP says it will price oil on average of around $55/bbl for Brent and $2.90 per mmBtu for Henry Hub gas ($2020 real), from 2021-2050.
"These actions will lead to non-cash impairment charges and write-offs in the second quarter, estimated to be in an aggregate range of $13 billion to $17.5 billion post-tax," BP stated.
BP added that as part of its long-term strategic planning it is also reviewing its intent to develop some of its exploration intangible assets.
“In February we set out to become a net zero company by 2050 or sooner”, said Bernard Looney, BP chief executive officer.
“Since then we have been in action, developing our strategy to become a more diversified, resilient and lower carbon company. As part of that process, we have been reviewing our price assumptions over a longer horizon. That work has been informed by the COVID-19 pandemic, which increasingly looks as if it will have an enduring economic impact.
“So, 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.”
BP believes that as the COVID-19 pandemic has continued during the second quarter of 2020, it now sees the prospect of the pandemic having an enduring impact on the global economy, with the potential for weaker demand for energy for a sustained period.
"BP’s management also has a growing expectation that the aftermath of the pandemic will accelerate the pace of transition to a lower carbon economy and energy system, as countries seek to ‘build back better’ so that their economies will be more resilient in the future," the oil giant added.
Last week, BP announced plans to cut 10,000 jobs following a global slump in demand for oil caused by the COVID-19 pandemic.
Source: Pipeline ME
