BP will write off up to $17.5 billion from the value of its assets after cutting its long-term oil and gas price forecasts, betting the COVID-19 crisis will cast a lasting chill on energy demand and accelerate a shift away from fossil fuels.
Like its rivals, the British oil major is set to take a big hit to revenue from an unprecedented collapse in demand due to the pandemic. The impairments are set to raise its debt burden sharply and increase pressure to reduce its dividend.
The move comes as Chief Executive Bernard Looney prepares to outline his strategy in September to “reinvent” BP, including a reduced focus on oil and gas and a larger renewables business.
BP lowered its benchmark Brent oil price forecasts to an average of $55 a barrel until 2050, down by around 30 percent from previous assumptions of $70.
Moreover, BP said that the aftermath of the new coronavirus pandemic would accelerate the transition to a lower-carbon economy, in line with the goals of the 2015 Paris climate 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,” Looney added.
Last week, BP said it would cut about 15% of its workforce in response to the coronavirus crisis and as part of Looney’s strategy.