British-based energy company BP (NYSE:BP) has reviewed its long-term strategy and lowered its assumptions for oil prices looking out to 2050. The company said it uses the new assumptions to "create a framework that seeks to ensure investments align with its strategy and add shareholder value."
BP now sees an average oil price of $55 per barrel between 2021 and 2050, and a natural gas average price of $2.90 per mmBTU. The company said its strategy adjustments due to the lowered price assumptions will result in post-tax asset impairment charges and exploration write-offs of between $13 billion and $17.5 billion in the second-quarter of 2020. BP expects to release its results on Aug. 4, 2020.
Pre-tax impairment charges of up to $11 billion for property, plant, and equipment are planned. As of March 31, 2020, the company's oil and gas properties had a total value of $88.6 billion. Its planned exploration intangible write-offs of up to $10 billion come out of total intangible exploration assets valued at $14.2 billion, as of the last quarterly report.
The company said it revised its outlook due to the potential for sustained weaker demand from the COVID-19 pandemic having a longer lasting impact on the global economy. It sees recovery from the pandemic resulting in an accelerated transition away from fossil fuels "to a lower carbon economy and energy system."
BP also recently told its employees that it was planning to cut 10,000 jobs, or 15% of its workforce, as it seeks to navigate the current difficult environment.