The group could take a hit of up to $17.5bn from write-offs as the pandemic continues to have lasting effects
BP expects coronavirus to have enduring impact on the global economy
- BP is to write off up to $17.5bn of assets in its upcoming Q2 results
- Management has reduced their long-term price assumptions for Brent crude, down by roughly 30% to $55 a barrel and as a result it will be forced to make these write-offs
- Recommendation: We maintain our 'Buy' recommendation for investors willing to accept a medium level of risk
In an statement to the market this morning, BP seems to be acknowledging the impact on its business from the global pandemic. The oil giant is preparing to write off up to $17.5bn of assets in its upcoming Q2 results as management believe that the pandemic will have a lasting impact on the global economy and energy demand, including increasing the transition to cleaner and renewable fuels. In this regard they have reduced their long-term price assumptions for Brent crude, down by roughly 30% to $55 a barrel. As a result, they will be forced to make these write offs.
While the group has made previous announcements of cost cutting measures and job cuts, it has still been resistant to make any mention of its dividend which it decided to continue paying against a tide of cuts by the market and peers. However, this morning’s announcement may be management’s way of softening the blow and leading us to expect a cut in the dividend when they publish the second quarter results in early August.
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