Coronavirus: BP plans $17.5bn write-offs as oil price forecast plummets

Tom Belger
Finance and policy reporter

BP downgraded its price forecast. (PA)

BP (BP.L) has sharply downgraded its oil price expectations for the coming decades, predicting the coronavirus crisis will accelerate a shift towards greener energy.

The oil and gas giant said on Monday it would lead to a write-down of between $13bn and $17.5bn (£13.9bn) in is earnings for the second quarter. Its share price slid 5.5% in early trading in London.

Its figures now suggest benchmark brent crude prices will average at $55 a barrel between next year and 2050, with gas prices also revised downwards. A spokesperson said it marked a drop of around 30% on previous forecasts.

CEO Bernard Looney said in a statement it increasingly appeared that COVID-19 would have an “enduring economic impact.”

He said: "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.”

READ MORE: BP to slash 10,000 jobs on slump in demand

BP had already vowed in mid-February to become a “net zero company” by 2050 at the latest.

The latest statement confirmed some of its exploration prospects are now up in the air, with a review of whether development will go-ahead. An assessment is also underway of the knock-on effect on the value of the group’s intangible assets.

It comes a week after the company announced 10,000 job losses as part of a drastic cost-cutting plan triggered by the slump in oil prices (CL=F) in recent months.

The job cuts, equivalent to 15% of the company’s global workforce, will mainly affect senior office-based roles, the company said.

“The oil price has plunged well below the level we need to turn a profit. We are spending much, much more than we make,” Looney said in a webcast to employees last week.

Looney told employees that BP was aiming to reduce capital expenditure by $3bn (£2.4bn) in 2020, and operating expenditure by $2.5bn.

“To me, the broader economic picture and our own financial position just reaffirm the need to reinvent BP. While the external environment is driving us to move faster — and perhaps go deeper at this stage than we originally intended — the direction of travel remains the same,” he told staff.