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Here's Why BP Decides to Write Off Up to $17.5B From Assets

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BP plc BP has estimated a write-off of up to $17.5 billion from its assets value following the downward revision of its long-term oil and gas prices.

The British energy giant expects the ongoing coronavirus pandemic to persistently hurt global energy demand. Also, the company believes that post COVID-19, there will be growing transition to low-carbon economy since investors are increasingly pressing oil companies to drastically reduce carbon emissions, which is in line with the Paris climate goals.

To incorporate these impacts, BP trimmed its forecast for Brent oil price from $70 per barrel to $55 until 2050. The new price outlook convinced this integrated energy firm to include non-cash impairment charges and write-offs worth $13-$17.5 billion, after tax, in the second quarter.

Analysts believe that the decrease in asset values will increase BP’s debt-to-equity ratio, thereby weakening the balance sheet.Per global investment bank RBC Capital Markets, the weakening of financials will force the company to curtail its dividend payments.  

BP p.l.c. Price

BP p.l.c. Price
BP p.l.c. Price

BP p.l.c. price | BP p.l.c. Quote

Currently, BP carries a Zacks Rank #3 (Hold). Better-ranked players in the energy sector include Murphy USA Inc MUSA, QEP Resources, Inc. QEP and CNX Resources Corporation CNX, all stocks currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Murphy USA is likely to see earnings growth of 7% in the next five years.

QEP Resources has witnessed upward earnings estimate revisions for 2020 in the past 30 days.

CNX Resources has witnessed northward estimate revisions for 2020 bottom line in the past 60 days.

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