TIDMBP.
RNS Number : 9344P
BP PLC
15 June 2020
press release
15 June 2020
Progressing strategy development, bp revises long-term price
assumptions, reviews intangible assets and, as a result,
expects non-cash impairments and write-offs
In mid-February, BP p.l.c. (bp) laid out a new purpose - to
reimagine energy for people and our planet - and its ambition to
become a net zero company by 2050 or sooner and to help the world
get to net zero. Since then, bp has focused its work in three key
areas:
-- Developing its strategy to create a more diversified,
resilient and lower-carbon energy company
-- Reinventing bp into a leaner, faster-moving and lower cost organisation
-- Strengthening its finances in response to the challenging environment.
As part of its strategy development, bp has been reviewing its
portfolio and its capital development plans. This work is informed
by bp's views of the long-term price environment and its balanced
investment criteria. Together these create a framework that seeks
to ensure investments align with its strategy and add shareholder
value.
In addition, with the COVID-19 pandemic having continued during
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.
bp's management also has a growing expectation that the
aftermath of the pandemic will accelerate the pace of transition to
a lower carbon economy and energy system, as countries seek to
'build back better' so that their economies will be more resilient
in the future.
As a result of all the above, bp has revised its long-term price
assumptions, lowering them and extending the period covered to 2050
so that it is now consistent with its ambition horizon. As part of
its long-term strategic planning, and in the context of its
continuing focus on capital discipline, bp is also reviewing its
intent to develop some of its exploration intangible assets.
These actions will lead to non-cash impairment charges and
write-offs in the second quarter, estimated to be in an aggregate
range of $13 billion to $17.5 billion post-tax.
"In February we set out to become a net zero company by 2050 or
sooner", said Bernard Looney, bp chief executive officer.
"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. 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. 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."
Revised long-term price assumptions
bp's revised investment appraisal long-term price assumptions
are now an average of around $55/bbl for Brent and $2.90 per mmBtu
for Henry Hub gas ($2020 real), from 2021-2050. 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. However, they do not correspond to any specific
Paris-consistent scenario.
As a result of the revision of long-term price assumptions used
for investment appraisal, bp has also revised the price assumptions
it uses in value in-use impairment testing and these are now
aligned to bp's revised investment appraisal price assumptions.
bp has also revised its carbon prices for the period to 2050 and
these now include a price of $100/teCO(2) in 2030 ($2020 real).
Intangible assets review
bp is also reviewing its intent to develop some of its
exploration prospects and consequently is assessing the carrying
values of the group's intangible assets.
Estimated impairment charges and exploration write-offs
bp's impairment and intangible assets assessments are in
progress and it is not possible at this time to precisely determine
the impact of the revised impairment testing price assumptions, or
the outcome of the assessment of intangible assets, on the group's
financial statements.
However, bp currently estimates that non-cash, pre-tax
impairment charges against property, plant & equipment
(PP&E) in the range of $8 billion to $11 billion, and
write-offs of exploration intangibles in the range of $8 billion to
$10 billion, will be reported in its second-quarter 2020
results.
bp currently estimates that the aggregate second-quarter 2020
non-cash, post-tax PP&E impairment charges and exploration
intangible write-offs will be in the range of $13 billion to $17.5
billion.
Further information will be provided in bp's second-quarter 2020
results, expected to be released on 4 August 2020.
Notes :
1. This announcement includes inside information as defined in
Article 7 of the Market Abuse Regulation No. 596/2014. The person
responsible for arranging the release of this announcement on
behalf of BP p.l.c. is Ben Mathews, Company Secretary.
2. As set out in bp's first quarter 2020 financial results, as
at 31 March 2020, property, plant & equipment was $130.2
billion (oil and gas properties $88.6 billion) and intangible
assets were $15.5 billion, $14.2 billion of which related to
exploration intangibles
3. The investment criteria applied by bp in its investment
appraisal process are described in BP Annual Report and Form 20-F
2019, page 19.
4. References in this announcement and these notes to BP Annual
Report and Form 20-F 2019 - Note 1, unless otherwise stated, are to
BP Annual Report and Form 20-F 2019 - Financial statements - Note 1
- Significant judgements and estimates: recoverability of asset
carrying values.
5. Information regarding the carrying amount of the group's
exploration intangibles were given in BP Annual Report and Form
20-F - Financial statements - Note 1 - Significant judgement:
exploration and appraisal intangible assets, BP Annual Report and
Form 20-F 2019 - Note 1 and Note 8.
6. bp's revised impairment testing price assumptions for Brent
oil and Henry Hub gas are now lower, on average, by approximately
27% and 31% respectively for the period from 2020 to 2050, than the
prices referenced in BP Annual Report and Form 20-F 2019 - Note
1.
7. As set out in BP Annual Report and Form 20-F 2019 - Note 1,
the majority of bp's reserves and resources that support the
carrying amount of the group's oil and gas properties are expected
to be produced over the next 10 years.
8. The revised average price assumptions for Brent oil and Henry
Hub gas for the next 10 years are lower by approximately 30% and
16% respectively than the average prices used to estimate cash
flows over this period as disclosed in BP Annual Report and Form
20-F 2019 - Note 1.
9. This announcement updates the price assumptions disclosed in
BP Annual Report and Form 20-F 2019 - Financial statements - Note
1, as well as in Note 1 - Impairment testing assumptions, in bp's
first-quarter 2020 results. In addition, the price sensitivity
analyses disclosed in BP Annual Report and Form 20-F 2019 -
Financial statements - Note 1 - Significant judgements and
estimates: recoverability of asset carrying values no longer
reflect management's assessment of the impact of changes in price
assumptions on the group's results.
Further information :
BP press office, London: +44 7831 095541, bppress@bp.com
Cautionary statement :
In order to utilize the 'safe harbor' provisions of the United
States Private Securities Litigation Reform Act of 1995 (the
'PSLRA'), bp is providing the following cautionary statement. This
press release contains certain forward-looking statements - that
is, statements related to future, not past events and circumstances
- which may relate to one or more of the financial conditions,
results of operations and businesses of bp and certain of the plans
and objectives of bp with respect to these items. These statements
are generally, but not always, identified by the use of words such
as 'will', 'expects', 'is expected to', 'aims', 'should', 'may',
'objective', 'is likely to', 'intends', 'believes', 'anticipates',
'plans', 'we see' or similar expressions. In particular, among
other statements, statements relating to bp's purpose, net zero
ambition, reinvention and strategy, including to be a net zero
company by 2050 or sooner and to help the world get to net zero;
expectations that the framework created by bp's views of the
long-term price environment and bp's balanced investment help
ensure investments align with its strategy and add shareholder
value; statements and expectations relating to the coronavirus
pandemic (COVID-19) including its risks, impacts, consequences and
challenges; expectations that the aftermath of the COVID-19
pandemic will accelerate the pace of the transition to a lower
carbon economy and energy system; expectations regarding how
countries' economies will be rebuilt in the aftermath of the
COVID-19 pandemic and how that will contribute to the pace of the
transition to a lower carbon economy and energy system;
expectations regarding oil and gas prices; expectations that the
revision of bp's long-term price assumptions and review of its
intent to develop some of its exploration intangible assets will
lead to impairment charges and write-offs in bp's second quarter
results and expectations and estimates of the range of any such
charges and write-offs; expectations regarding the revised
investment appraisal long-term price assumptions; expectations
regarding transition paths and scenarios that are consistent with
the Paris climate goals; expectations regarding the revised price
assumptions used in value in-use impairment testing; expectations
regarding the revised carbon prices for the period
to 2050; expectations regarding bp's review of its intent to
develop some of its exploration prospects; plans and expectations
regarding the assessment of the carrying value of the group's
intangible assets; expectations and estimates regarding the impact
of the revised impairment testing price assumptions, or the outcome
of the assessment of the carrying values of the group's intangible
assets, on the group's financial statements; expectations and
estimates for the range of non-cash pre-tax impairment charges
against property, plant & equipment (PP&E) and range of
write-offs of exploration intangibles which are expected to be
reported in bp's second-quarter 2020 results; expectations and
estimates for the range of the aggregate second-quarter 2020
non-cash, post-tax PP&E impairment charges and exploration
intangible write-offs; expectations regarding the date on which
bp's second-quarter 2020 results will be released; and expectations
that the majority of bp's reserves and resources that support the
carrying amount of the group's oil and gas properties will be
produced over the next 10 years, are all forward looking in nature.
By their nature, forward-looking statements involve risk and
uncertainty because they relate to events and depend on
circumstances that will or may occur in the future and are outside
the control of bp. Actual results may differ from those expressed
in such statements, depending on a variety of factors including the
extent and duration of the impact of current market conditions
including the significant drop in the oil price, the impact of
COVID-19, overall global economic and business conditions impacting
our business and demand for our products as well as the specific
factors identified in the discussions accompanying such
forward-looking statements and other factors discussed under "Risk
Factors" in our most recent Annual Report and Form 20-F and in any
of our more recent public reports.
Our most recent Annual Report and Form 20-F and other period
filings are available on our website at www.bp.com or can be
obtained from the SEC by calling 1-800-SEC-0330 or on its website
at www.sec.gov
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
MSCGUGDLIDBDGGU
(END) Dow Jones Newswires
June 15, 2020 02:00 ET (06:00 GMT)
Bp (LSE:BP.)
Historical Stock Chart
From Mar 2024 to Apr 2024
Bp (LSE:BP.)
Historical Stock Chart
From Apr 2023 to Apr 2024