The darker economic environment caused by the coronavirus pandemic, he said in an email to employees on June 8, “is driving us to to move faster — and perhaps go deeper at this stage than we originally intended.” The makeover is now expected to lead to the loss of 10,000 jobs, or nearly 15 percent of the work force.
The write-downs are being taken for two reasons. BP has cut its long-term expectations of oil and gas prices by about 30 percent, to $55 a barrel for oil, a move that reduces the value of its assets. The company is also writing off resources in places like the Gulf of Mexico and Canada that it has on its books but may decide not to develop over the coming decades.
“BP is already getting to grips with the idea that” its oil and gas fields are worth less than it recently believed, said Luke Parker, an analyst at Wood Mackenzie, a market research firm. “Indeed, some of them are worth nothing.”
Oil companies periodically review their businesses, leading to write-downs. In December, before the pandemic, Chevron took a $10.4 billion write-down, mostly for natural gas properties amid a glut. Analysts at Bernstein, a market research firm, said in a note on Monday that BP’s charges were the largest among major European oil companies in a decade.
Analysts said that the $70-a-barrel price that BP was using looked increasingly unrealistic and was higher than that of other major oil producers in Europe. Analysts at Barclays wrote in a note to clients on Monday that BP’s new pricing assumption was the lowest among a group of European oil giants, including Royal Dutch Shell and the French company Total. BP’s move could put pressure on rivals to take similar steps.
Still, analysts at Morgan Stanley said Monday that BP’s $55-a-barrel price assumption might turn out to be “optimistic” because that level would encourage increased shale drilling in the United States, which could further depress prices.
Mr. Looney said in a statement that he was “confident that these difficult decisions” would better enable the company to compete as the energy industry changes. Several analysts, however, speculated that BP was likely to cut its dividend, a key consideration for investors.