BP to write down up to $17.5 billion in second quarter, lowers oil price expectations to 2050

Energy giant BP announced Monday it had lowered its oil price expectations through to 2050, saying the aftermath of the coronavirus pandemic was likely to accelerate the transition to a lower carbon economy and energy system.

The U.K.-headquartered oil and gas company said it had been reviewing its portfolio and capital development plans as part of its ambition to become a net-zero company by 2050 or sooner.

It now expects international benchmark Brent crude futures to average around $55 a barrel from 2021 through to 2050, with Henry Hub gas prices forecast to average $2.90 over the same period.

Henry Hub is a natural gas pipeline located in Louisianna and serves as the official delivery location for futures contracts on the New York Mercantile Exchange.

BP’s forecasts for Brent futures and Henry Hub gas prices are down roughly 27% and 31%, respectively, when compared to those cited in the group’s annual report at the end of 2019.

As a result of its long-term strategic planning and continued focus on capital discipline, BP said it expected to incur non-cash impairment charges and write-offs in the second quarter, estimated to be in an aggregate range of $13 billion to $17.5 billion after tax.

The company said it was unable to precisely determine the impact of the revised impairment testing price assumptions on the group’s financial statements.

Shares of BP dipped around 4% during early morning deals.

Brent crude futures traded at $38.11 a barrel on Monday morning, around 1.6% lower, while U.S. West Texas Intermediate crude futures stood at $35.20, down almost 3%.

Earlier this month, BP said it would cut 10,000 jobs from the current 70,100 in response to the coronavirus crisis, with the majority of those affected leaving by the end of this year.

BP to write down up to $17.5 billion in second quarter, lowers oil price expectations to 2050, CNBC, Jun 15