BP’s new boss Bernard Looney must be powered by rocket fuel, looking at the speed at which he is rejigging the oil giant.
Within days of taking over as chief executive in February, he revealed grand plans for BP to become zero carbon by 2050. That was in the BC – or Before Covid – era.
Now the BP chief executive has moved swiftly again to adapt to a post-Covid world, first by cutting 10,000 jobs last week and now by writing off a big chunk of assets.
Going green as grass: Bernard Looney says that oil prices will stay way below historic levels
Looney says the pandemic has accelerated and amplified the shift to a greener economy, and that oil prices will stay way below historic levels.
This is why BP has cut its long-term planning price for Brent Crude oil from $78 per barrel to $58 per barrel.
Gas price forecasts are also much lower.
It’s also behind BP’s decision to write-off up to $17.5billion of assets, including $8billion- $10billion of its exploration intangible assets. These are the oil and gas fields which have yet to be analysed for future production or deemed uneconomic.
Slicing off such a big proportion of assets shows just how serious BP is about stepping back from oil exploration – but not stopping it – and moving faster towards building up high-quality low carbon assets and renewables such as solar.
The write-down represents about 10 per cent of BP’s book value and will take place in August when second-half figures are due.
Shares in BP dived on the news – eventually closing 2.2 per cent down – amid fears the company’s dividend will be trimmed with the next results.
If so, this would be the first cut since the Gulf of Mexico debacle a decade ago from which the company has never fully recovered. Net debt has soared, and it is not generating enough cash to cover the dividend as well as other spending commitments.
As Looney said in an email to staff: ‘The oil price has plunged well below the level we need to turn a profit. We are spending much, much more than we make.’ Cutting the divi would be a blow to investors and pensioners as the shares are held by so many of the UK’s big institutions and was the second-biggest dividend payer after Shell.
It is estimated BP now accounts for around 7 per cent of FTSE100 dividends.
Yet investors should not give up on the shares. At 316p, they have fallen by around a third since lockdown, taking a bigger knock than the FTSE 100, and hopefully most of the bad news has been priced in.
Looney may be a newbie in the top job but he has been with BP for 28 years, joining as a graduate engineer, so should know where he is heading. If he keeps powering ahead at this rate, the shares might be worth a buy.
Guess where the word ‘shop’ comes from? It’s a cocktail of an old English word, scoppa, or scypen, meaning cattle shed, the old French eschoppe, or booth, and schopf, the old German for porch.
The first usage of the word shop goes back to the 13th century for a booth where cattle were bought and sold, and where people came to haggle with the owners.
In other words, it’s where people came face-to-face with each other to barter and trade with each other but also to socialise. Good old-fashioned animal spirits if you like which is just what we need to get the economy motoring again
Looking at the queues outside shops like Primark and Zara across the UK yesterday, it doesn’t seem that Britons have lost their verve for shopping. Research firm Springboard reckons footfall was up 50 per cent on this time last week, but a third down on same time last year.
That’s hardly a surprise. It’s too early to tell whether people will spend as much as they did pre-lockdown or have changed their spending habits.
Online shopping proved not only to be a godsend during lockdown but super-efficient too. My hunch is we will see a return to normal face-to-face shopping sooner than we think, even if it is mask-to-mask.
If there are changes, it will be for more local shopping, which is good for independents like farm shops, as well as high streets.
Back to the cowshed.
JLR in reverse
Bentley and Aston Martin have already announced job losses.
Now it’s the turn of Jaguar Land Rover to chop 1,100 contractors from its 32,000 work force. Britain’s biggest car maker dived into the red in the fourth quarter after sales dropped by a third because of the global pandemic.
What’s interesting to note is that while luxury car makers are in trouble, VW reports big demand for its California Camper vans.
Swings and roundabouts.
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