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BP Writes Downs Up to $17.5 Billion in Assets

By Howard Smith – Jun 15, 2020 at 9:28AM

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The energy giant sees the COVID-19 pandemic resulting in lower energy demand, and prices, for a sustained period.

British-based energy company BP (BP 1.06%) 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. 

deep sea oil rig against blue sky with gas flaring

Image source: Getty Images.

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. 

Howard Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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