(Bloomberg) — BP Plc will make the biggest write down in a decade on the value of its business, as the British oil major predicts the coronavirus pandemic will hurt long-term demand and accelerate the shift to cleaner energy.The company sees oil and gas being about 20% to 30% cheaper than before on average, and also expects the cost of carbon emissions to be more than twice as high.In response, BP is undertaking a review of its projects that could result in some oil discoveries being left in the ground. This risk, of so-called stranded assets, is an issue of growing importance as the industry grapples with fundamental shifts in energy consumption trends.Under its new Chief Executive Officer Bernard Looney, BP has been quicker than many of its peers to acknowledge and plan for these changes. Yet moves toward a more sustainable future bring financial pain today. BP’s latest actions will lead to non-cash impairment charges and write-offs in the second quarter, estimated to be in a range of $13 billion to $17.5 billion post-tax. They also renewed questions about the sustainability of its dividend. Shares of the company fell 4.4% to 308.7 pence as of 9:14 a.m. in London.Enduring Impact“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,” the company said in a statement on Monday. “The aftermath of the pandemic will accelerate the pace of transition to a lower carbon economy.”In February, BP outlined its ambitions to become a “net-zero” company by 2050. The company acknowledged that production will decline in the long term, and said whatever is pumped in 2050 “will have to be de-carbonized.” Peers including Royal Dutch Shell Plc, Total SA and Equinor ASA have also set out agendas for what’s becoming an existential challenge for the oil industry.Two of those companies — Shell and Equinor — cut their dividends last quarter. A growing number of analysts expect BP to follow. ”It does now look increasingly likely that BP will reduce the dividend alongside the second quarter results,” Barclays said in a note. “With the shares trading on a 10% dividend yield, this already seems to be factored into the share price.”Cheaper OilBP’s revised investment appraisal long-term price assumptions from 2021 to 2050 now average $55 a barrel for Brent crude, down from $70 previously, and $2.90 per million British thermal units for Henry Hub gas, compared with $4 before.It expects the cost of emitting a ton of carbon dioxide to be $100 in 2030, up from a previous assumption of $40. These new prices are “broadly in line” with the Paris climate goals, BP said. “This huge dent in BP’s balance sheet suggests it has finally dawned on BP that the climate emergency is going to make oil worth less,” Charlie Kronick, senior climate adviser for Greenpeace U.K., said in a a statement. “BP must protect its workforce, and offer training to help people move into sustainable jobs in decommissioning and offshore wind.”The company is scheduled to publish its second-quarter results on Aug. 4. Looney will give a more detailed road map for BP’s transition to clean energy and net-zero emissions in September. (Updates with changes to price assumptions in second paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
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Jun.15 — EasyJet Plc Chief Executive Officer Johan Lundgren discusses the low-cost airline’s return to service, health measures inside cabins and the outlook for load factors. He speaks on “Bloomberg Markets: European Open.”Extraction Oil & Gas (XOG) has announced that it has voluntarily filed for petitions for relief under chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware. Shares are now falling 30% in Monday's pre-market trading.“After months of liability management and careful analysis of our strategic options, we determined that a voluntary chapter 11 filing with key creditor support provides the best possible outcome for Extraction,” said Extraction CEO Matt Owens.At the same time, XOG revealed that it has obtained a committed $125 million debtor-in-possession financing facility, with $50 million in new money, up to $15 million of which will become immediately available upon the Bankruptcy Court’s order, and a “roll up” of $75 million of revolving loans under Extraction’s existing revolving credit agreement.The DIP Facility is underwritten by Wells Fargo Bank, National Association and the $50 million in new money is financed by certain existing lenders.According to Extraction Oil & Gas, this funding would provide sufficient liquidity during the chapter 11 cases to support its continuing business operations and minimize disruption.And to ensure a ‘swift exit from chapter 11’, XOG also announced a restructuring support agreement with certain of its unsecured noteholders.This includes a restructuring plan with significant deleveraging of the balance sheet through a debt-for-equity swap, which XOG says will leave the debtors’ unsecured noteholders with the majority of equity while still providing a meaningful recovery to junior stakeholders.“Though the company was unable to obtain consensus across its entire prepetition capital structure prior to filing, the company plans to use the chapter 11 process to build consensus for a comprehensive restructuring transaction” XOG stated.Shares in Extraction have plunged 70% year-to-date, and the stock shows a bearish Moderate Sell Street consensus. The average analyst price target of $0.6 indicated that shares had room to fall even further. (See XOG stock analysis on TipRanks).“While the company has some solid assets in the DJ Basin, we think it is not fundamentally designed for oil prices below $50/bbl” RBC Capital’s Brad Heffern wrote back in May after the company provided some cautionary language about its value as a going concern and revealed that it had hired strategic advisors to help pursue a restructuring.“We see XOG struggling to cover debt maturities in 2024+, and transportation commitments limit the company’s ability to substantially curtail uneconomic drilling” he added.Related News: First Majestic Seeks Help In Mexico Tax Dispute, As Analyst Applauds Springpole Deal 2 Dividend Stocks Yielding More Than 5%; RBC Says ‘Buy’ RWE, Thyssenkrupp Plan Hydrogen Production Partnership – Report More recent articles from Smarter Analyst: * Israel Is Said To Be In Talks To Buy Moderna’s Covid-19 Vaccine Candidate * First Majestic Seeks Help In Mexico Tax Dispute, As Analyst Applauds Springpole Deal * Amazon Now Also Under Investigation By Washington State – Report * Blackstone To Invest $337 Million In Medtronic’s Diabetes Programs