BP to take a $1bn writedown due to oil price collapse
BP expects to take a write down of up to $1bn for the first quarter of 2020 as the oil giant feels the strain of the recent oil price collapse.
Across the whole year, the firm will reduce spending by 20 per cent and also halve investment in its shale oil business.
In a statement, new BP chief executive Bernard Looney said that the current situation could be “the most brutal environment for oil and gas businesses in decades”.
On Monday benchmark Brent crude sank to its lowest levels in 18 years, extending a run of losses which has prices fall nearly two-thirds over the last two months.
Prices were already in decline due to a price war between de factor Opec leader Saudi Arabia and Russia, before widespread travel restrictions following the coronavirus outbreak sent them into freefall.
Alongside rivals such as Shell, BP is now taking steps to mitigate against the price collapse.
The London-based company said it will now spend $12bn this year, down from $15bn, in line with the average industry spending reduction of 20 per cent.
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That will include a $1bn reduction in investment in its shale business, known as BPX, where production can be switched on and off relatively quickly, representing a 50 per cent drop from 2019 investment levels.
Shale oil has been battered by the crisis, with barrels changing hands for as little as $7 recently.
BP will also cut its production by around 15 per cent – nearly 70,000 barrels a day – across the course of the year.
Looney, who only took over as the oil major’s chief two months ago, said that the firm’s $15bn divestment programme was on track, although the completion of some deals may be delayed.
The programme, which is due to complete next year, is crucial for BP’s attempts to reduce its debt pile.
The firm has $32bn in cash and undrawn credit facilities as of the end of the first quarter.