BP said it will write off up to $17.5bn from the value of its assets as the UK oil major revises longer-term energy price assumptions with the expectation of a quicker shift away from fossil fuels.
BP said coronavirus will have a lasting impact on the global economy as well as oil and gas demand and sees the pandemic only accelerating a global shift towards cleaner forms of energy.
Under its new chief executive Bernard Looney, the company is undertaking an overhaul of its business as it becomes a leaner organisation that is fit for the energy transition.
BP’s long-term price assumptions are now down by around 30 per cent to an average of around $55 a barrel for Brent crude and $2.90 per million British thermal units for Henry Hub gas from 2021-50.
These new assumptions will prompt BP to review some of its exploration plans, the company said.
In the second quarter it expects to report non-cash, post-tax impairment charges and exploration write-offs of between $13bn and $17.5bn.
BP reports second-quarter earnings on August 4.
Some investors, including Sarasin & Partners, have long said that the biggest oil majors’ use of overly optimistic long-term energy price assumptions has led to them overstate their capital, earnings and ability to pay out dividends.