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BP set for massive write offs as coronavirus aftermath predicted to accelerate global low-carbon transition

Economies will be "rebuilt better" in the wake of the pandemic, according to BP

BP PLC - BP set for US$13bn to US$17.5bn of write offs as COVID-19 aftermath is predicted to accelerate global low-carbon transition
New CEO Bernard Looney aims to make BP a "net zero" carbon company by 2050 or sooner

BP PLC (LON:BP.) shares spiked over 5% lower in Monday morning’s deals after announcing it will make shuddering write-offs of US$13bn to US$17.5bn as it sees the coronavirus (COVID-19) pandemic having “an enduring impact” on the global economy.

By mid-morning, the oil supermajor’s shares recovered partially to change hands at 313.86p, down 2.85% for the day so far.

In a statement, the FTSE 100-listed oil supermajor said it sees the potential for weaker demand for energy for a sustained period in the wake of the crisis.

Moreover, BP added that its management has a growing expectation that the aftermath of the virus will accelerate the pace of transition to a lower-carbon economy and energy system because countries will aim to “build back better” so that they will be more resilient in the future.

READ: BP to slash 10,000 jobs to save US$2.5bn

As such, BP said it has now downgraded its long-term oil price assumptions for the period out to 2050.

At the same time, the group said it is now “reviewing its intent to develop some of its exploration intangible assets” all of which factor into the eye-watering write-offs.

"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,” said Bernard Looney, BP chief executive.

“We are also reviewing our development plans. All that will result in a significant charge in our upcoming results, but I am confident that these difficult decisions - rooted in our net zero ambition and reaffirmed by the pandemic - will better enable us to compete through the energy transition."

Unlike peer and rival Royal Dutch Shell Plc (LON:RDSB), BP avoided a reduction to 2019’s final dividend.

But Helal Miah, analyst at The Share Centre, in a note, suggested a dividend cut may be incoming.

“While the group has made previous announcement 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 the 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.”

 

--UPDATED to include share price details and broker comments--

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