The darker financial atmosphere attributable to the coronavirus pandemic, he mentioned in an e-mail to workers on June 8, “is driving us to to maneuver quicker — and maybe go deeper at this stage than we initially supposed.” The makeover is now anticipated to result in the lack of 10,000 jobs, or almost 15 % of the work pressure.
The write-downs are being taken for 2 causes. BP has reduce its long-term expectations of oil and gasoline costs by about 30 %, to $55 a barrel for oil, a transfer that reduces the worth of its property. The corporate can be writing off assets in locations just like the Gulf of Mexico and Canada that it has on its books however could determine to not develop over the approaching many years.
“BP is already attending to grips with the concept that” its oil and gasoline fields are value lower than it not too long ago believed, mentioned Luke Parker, an analyst at Wooden Mackenzie, a market analysis agency. “Certainly, a few of them are value nothing.”
Oil firms periodically assessment their companies, resulting in write-downs. In December, earlier than the pandemic, Chevron took a $10.4 billion write-down, largely for pure gasoline properties amid a glut. Analysts at Bernstein, a market analysis agency, mentioned in a notice on Monday that BP’s prices have been the biggest amongst main European oil firms in a decade.
Analysts mentioned that the $70-a-barrel worth that BP was utilizing appeared more and more unrealistic and was larger than that of different main oil producers in Europe. Analysts at Barclays wrote in a notice to purchasers on Monday that BP’s new pricing assumption was the bottom amongst a bunch of European oil giants, together with Royal Dutch Shell and the French firm Complete. BP’s transfer might put strain on rivals to take comparable steps.
Nonetheless, analysts at Morgan Stanley mentioned Monday that BP’s $55-a-barrel worth assumption would possibly grow to be “optimistic” as a result of that stage would encourage elevated shale drilling in the US, which might additional depress costs.
Mr. Looney mentioned in a press release that he was “assured that these troublesome selections” would higher allow the corporate to compete because the vitality trade adjustments. A number of analysts, nonetheless, speculated that BP was more likely to reduce its dividend, a key consideration for traders.