SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
for the
period ended 15 June, 2020
BP p.l.c.
(Translation
of registrant's name into English)
1 ST JAMES'S SQUARE, LONDON, SW1Y 4PD, ENGLAND
(Address
of principal executive offices)
Indicate
by check mark whether the registrant files or will file
annual
reports
under cover Form 20-F or Form 40-F.
Form
20-F |X| Form 40-F
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Indicate
by check mark whether the registrant by furnishing the
information
contained
in this Form is also thereby furnishing the information to
the
Commission
pursuant to Rule 12g3-2(b) under the Securities Exchange Act
of
1934.
Yes No
|X|
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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/teCO2 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
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
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BP
p.l.c.
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(Registrant)
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Dated: 15
June 2020
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/s/ Ben
J. S. Mathews
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Ben J.
S. Mathews
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Company
Secretary
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