BP Can Operate as a Going Concern for 12 Months if Brent Falls to Zero -- Commodity Comment

By Ian Walker

BP PLC on Tuesday reported a swing to profit in the fourth quarter of 2020, and said it can continue to operate as a going concern for at least 12 months even if the price of Brent crude fell to zero.

On gas prices:

"The current tightness on global [liquefied-natural-gas] markets and higher U.S. gas prices will lift other regional gas prices."

"U.S. gas markets are likely to benefit from lower production and a recovery in international LNG demand driven by demand in Asia."

"We expect the U.S. gas market to tighten in 2021 as supply declines and demand for LNG exports recovers."

On downstream:

"In the first quarter of 2021 we expect material impacts in downstream as a result of the pandemic, with increased Covid-19 restrictions resulting in lower product demand."

On fourth-quarter trading:

"The result for the fourth quarter mainly reflects lower liquids and gas realizations, lower production including the impact of divestments, and a significantly weaker gas marketing and trading contribution, partly offset by lower depreciation, depletion and amortization."

"Compared with the same period in 2019, the result for the fourth quarter primarily reflects lower oil prices partially offset by favorable foreign exchange effects."

On operating as a going concern:

"Reverse stress tests performed indicated that the group will continue to operate as a going concern for at least 12 months from the balance sheet date even if the Brent price fell to zero."

On Covid-19:

"BP sees the prospect of an enduring impact on the global economy as a result of the Covid-19 pandemic, with the potential for weaker demand for energy for a sustained period."

On oil supply:

"From the oil supply side, limited growth from non-OPEC+ countries coupled with active market management from OPEC+ means that for 2021 we anticipate a normalization of the currently high inventory levels."

On 2021 production:

"We expect full-year 2021 underlying production to be slightly higher than 2020 due to the ramp-up of major projects, primarily in gas regions, partly offset by the impacts of reduced capital investment and decline in lower-margin gas assets."

Shares at 0840 GMT were up 9.05 pence, or 3.4%, at 258.05 pence.

Write to Ian Walker at [e-mail]

(END) Dow Jones Newswires

February 02, 2021 04:18 ET (09:18 GMT)

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