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What's going on?

BP might look big and tough, but it’s just as frightened as the rest of us: the British oil company admitted on Monday it could face asset “write-downs” worth $17.5 billion this quarter.

What does this mean?

Accountants regularly assess what a company’s assets are worth, and if they and the company’s bosses decide one of those assets isn’t actually as valuable as they thought, they’ll write down its value – effectively lowering what it’s worth on paper.

BP’s upcoming write-down coincides with the company’s lowering of its oil and gas price forecasts: the giant now thinks the average price of a barrel of oil will be $55 from next year through to 2050 – more than 25% below its previous prediction. And if BP thinks oil’s worth less, the oil major’s oil fields must be too, leading to the write-down it’ll announce in its second-quarter update.

Why should I care?

For markets: The waiting game.

Things have gone from bad to worse for BP and its investors: the company revealed a 70% drop in its first-quarter profit in April, and announced 10,000 job cuts last week. And while we’ll have to wait till August to see just how much damage this write-down has done to BP’s accounts, some investors weren’t keen to wait around: they sold off the oil major’s stock on Monday, and it fell 3%.

The bigger picture: Green is the new black.

One reason BP has lowered its oil price forecast is that it believes the coronavirus pandemic will actually accelerate the world’s transition to a lower-carbon economy. And BP wants to play its part, with an aim of net-zero carbon emissions by 2050. A Goldman Sachs report last year argued big oil companies would be at the center of the climate revolution – and with Shell, Repsol, and Total all on the front foot when it comes to environmental concerns, it might well be right.

Originally posted as part of the Finimize daily email.

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