British energy giant BP PLC yesterday said that it would take a hit of up to US$17.5 billion in the second quarter, as “sustained” COVID-19 fallout ravages global oil demand.
The company, fresh from outlining plans to axe almost 10,000 jobs due to the pandemic, said in a statement that it would suffer a negative impact of between US$13 billion and US$17.5 billion in non-cash impairments and write-offs.
BP also cut its long-term oil price forecast after the pandemic slammed the brakes on the global economy and hurt oil prices this year.
Photo: Reuters
“With the COVID-19 pandemic having continued during the second quarter of 2020, BP 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,” the group said, adding that the virus was set to accelerate a transition to lower carbon energy.
“BP has revised its long-term price assumptions, lowering them and extending the period covered to 2050,” it said.
“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,” it said.
“These actions will lead to non-cash impairment charges and write-offs in the second quarter, estimated to be in an aggregate range of US$13 billion to US$17.5 billion post-tax,” the group said.
BP chief executive Bernard Looney warned that the pandemic “increasingly looks as if it will have an enduring economic impact.”
“So, we have reset our price outlook to reflect that impact... We are also reviewing our development plans,” it said.
“All that will result in a significant charge in our upcoming results, but I am confident that these difficult decisions ... will better enable us to compete through the energy transition,” it said.
BP now expects European benchmark London Brent North Sea oil prices to average US$55 per barrel between next year and 2050, while it also lowered its guidance for gas prices.
The London-listed energy major one week ago announced plans to slash “close to 10,000” jobs, or almost 15 percent of its global workforce.
It also warned that oil prices had plunged well below the level which the group needed to turn a profit.
After companies worldwide closed their doors and airlines grounded planes towards the end of the first quarter, oil dropped off a cliff, causing prices to briefly turn negative.
However, prices have rebounded sharply in recent weeks, as governments ease lockdowns and businesses slowly reopen.
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