15th Jun 2020 08:19
(Alliance News) - BP PLC on Monday said it will record up to USD17.5 billion in exceptional charges for the second quarter of 2020 due to the recent oil price crash and weak demand.
Shares in BP opened 4.6% lower at 308.30 pence each on Monday. Year-to-date, the stock is down 36%.
The London-based oil major said it sees the prospect of the coronavirus pandemic having an enduring impact on the global economy, with the potential for weaker demand for energy for a "sustained period".
Further, BP believes there are growing expectations 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 energy company has revised its long-term price assumptions, lowering them and extending the period covered to 2050 so that it is now consistent with its long-term target of becoming a net zero company by 2050.
BP said this will lead to non-cash impairment charges and write-offs in the second quarter ending June 30, estimated to be in an aggregate range of USD13 billion to USD17.5 billion post-tax.
In addition, BP has revised investment appraisal long-term price assumptions which are now an average of around USD55 a barrel for Brent and USD2.90 per one million British thermal units of Henry Hub gas from 2021 to 2050.
Brent was quoted at USD37.44 a barrel Monday morning, down from USD38.44 late Friday. At the start of 2020, Brent was trading around USD66 a barrel; however, prices have tumbled due to a production war between oil nations and a sharp drop in demand following the virus outbreak.
"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 Chief Executive Bernard Looney said.
BP is scheduled to release its results for the second-quarter on August 4.
By Tapan Panchal; [email protected]
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