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British energy giant BP will reduce the value of its assets by billions of US dollars this year as the coronavirus continues to decimate demand for oil and is expected to have a long-term impact on the economies worldwide.
The oil major said on Monday that it has revised its long-term forecast for oil prices and is reviewing its developments plans, including its intent to develop some of its exploration intangible assets.
As a result, the company will make up to $17.5 billion, in write-offs and non-cash impairments, in the second quarter of 2020.
“BP now sees the prospect of the pandemic having an enduring impact on the global economy, with the potential for weaker demand for energy for a sustained period,” the company said in a filing to the London Stock Exchange.
The oil company reduced its price forecast for Brent crude oil to $55 per barrel, down from $75 per barrel.
BP had earlier confirmed plans to lay off 10,000 of its staff, citing that the pandemic is costing the company “millions of dollars.”
“The oil price has plunged well below the level we need to turn a profit. We are spending much, much more than we make - I am talking millions of dollars, every day,” chief executive Bernard Looney said in an email to his employees.
In a statement on Monday, Looney said the pandemic now “increasingly looks” as if it will have a lasting impact on the economy.
He recalled that the company had set out in February to become a “net-zero company” by 2050 or earlier.
“Since then, we have been in action, developing our strategy to become a more diversified, resilient and lower carbon company. As part of that process, we have been reviewing our price assumptions over a longer horizon,” he said.
“That work has been informed by the COVID-19 pandemic, which increasingly looks as if it will have an enduring economic impact. So, 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,” he added.
In April, the International Energy Agency (IEA) had forecasted global oil demand to drop by a record 9.3 million barrels per day this year compared to 2019.
“The impact of containment measures in 187 countries and territories has been to bring mobility almost to a halt,” the agency had said.
(Writing by Cleofe Maceda; editing by Mily Chakrabarty)
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