BP takes £14bn hit as prices fall
BP has been forced to reduce the estimated value of the oil left in its underground reserves, as the energy giant took charges and write-offs that could reach as much as £14billion.
The company said the coronavirus pandemic could have an “enduring impact” on the global economy, and reduce the need for energy for a long time.
It means that prices, which plunged to their lowest in decades in April, are unlikely to bounce back to where they had been before the crisis, BP said.
The oil giant reduced the value of its remaining reserves from $75 per barrel to $55 up to 2050.
That would still be a significant increase on current prices. Brent crude, the international standard, was trading at $38.24 yesterday morning.
But the reduction, and other non-cash charges, could cost BP between $13billion and $17.5billion (£10.4billion to £14billion), new boss Bernard Looney revealed.
The Irishman, who set out a plan to make the company emissions-neutral by the middle of the century, spun the Covid-19 pandemic as a way to accelerate global efforts to tackle climate change and meet the targets of the Paris Agreement.
“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,” he said.
“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.”
This could mean that BP decides to walk away from oil fields it was planning to develop.
“BP is also reviewing its intent to develop some of its exploration prospects and consequently is assessing the carrying values of the group’s intangible assets,” it said in a statement.
Last week, Mr Looney took one of the toughest decisions of his less than five months in charge, as he revealed that the company would be slashing 10,000 jobs.