Shares in oil major BP (BP.) fell 4.3% to 309.3p as it announced swingeing write-downs to the value of its assets amid a big reduction in its oil price assumptions.
The company is reacting both to the recent collapse in the oil market due to the coronavirus crisis and the longer term challenges associated with a shift to cleaner fuels.
The company said it expected to post after-tax non-cash impairment charges and write-offs for the three months through June in an aggregate range of $13bn to $17.5bn.
BP also cut its long-term oil price assumption while warning that weaker demand for energy could continue for a sustained period.
It now expects the average price of oil to be around $55 a barrel for Brent crude and $2.90 per mmBtu (one million British Thermal Units) for Henry Hub gas, from 2021-to-2050.
CLIMATE GOALS
'These lower long-term price assumptions are considered by BP to be broadly in line with a range of transition paths consistent with the Paris climate goals,' the company said.
AJ Bell investment director Russ Mould said: ‘Today’s update from BP feels like it is softening shareholders up for a dividend cut when the company posts its second quarter results at the beginning of August.
‘By laying bare the impact of the oil price crash on the business, slashing its oil price assumptions and taking tens of billions of dollars’ worth of write-downs, it is probably hoping any decision on the dividend will be seen in a more sympathetic light. This is particularly as plans for big job cuts have already been announced.
‘In hindsight the fact the second quarter dividend was not cut looks increasingly strange, particularly given its closest peer, Royal Dutch Shell, was prepared to end its own proud track record on dividends stretching back to the Second World War.’
