1st Apr 2020 09:42
(Alliance News) - Oil major BP PLC warned Wednesday of a USD1 billion impairment as Covid-19 leads to a collapse in demand for fuel.
The impairment will be non-cash and non-operating, BP said. The company said the Downstream segment will be hurt in the first quarter by a "significant and growing" fall in demand for fuels, jet fuel and lubricants.
BP said this has been particularly evident in China, and, towards the end of the first quarter, also in the larger US and European markets.
Downstream refining availability is expected to be between 95% and 96% for the quarter, though this fell towards the end of the three months. Refining availability in 2019 was 95%.
In Upstream, BP said production in the first quarter will be around 2.6 million barrels of oil equivalent per day, lower than the fourth quarter of 2019. However, it did say there has been no major operational impact so far from Covid-19, though warned this could change.
Elsewhere, BP has reduced organic capital spending plans for 2020 by 25% to around USD12 billion. For 2020, underlying Upstream output will be below 2019.
BP currently has a target of selling USD15 billion worth of assets by mid-2021, a plan which it said is on track. Since the start of 2019, USD9.6 billion of this has been secured.
The oil company has USD32 billion of cash and undrawn facilities, and BP noted the decision by Moody's Investors Service to lower its outlook on BP.
Earlier Wednesday, Moody's reaffirmed BP's A1 long-term debt rating but cut the outlook to negative from stable.
"Changing the outlook on BP's ratings to negative reflects the material impact that the collapsing oil and gas prices will have on the company's financial profile in 2020," said Sven Reinke, a senior vice-president at Moody's.
"While we expect that BP's strong liquidity and financial flexibility, as well as a normalisation of oil and gas prices, will support a recovery of its credit metrics in 2021 to 2022, we consider it less certain whether our requirements for an A1 rating will be met over the next 12 to 18 months."
BP shares were 3.8% lower on Wednesday morning in London at a price of 331.05 pence each.
By George Collard; [email protected]
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