Italian energy group Eni said it would write off around 3.5 billion euros ($4 billion) from the value of its assets after revising down its long-term outlook for oil and gas prices due to economic fallout from the COVID-19 crisis.
In a statement on Monday, Eni said it was cutting its 2023 long-term price assumption for Brent to $60 a barrel from a previous $70 and gas on the Italian hub to $5.5/million British thermal units from $7.8.
"Our changed long-term assumptions, reached four months after the outbreak of the COVID-19 pandemic, reflect our current expectations about future prices and will be incorporated in our processes of capital allocation," Eni CEO Claudio Descalzi said.
The move follows similar writedowns by rivals such as BP and Shell as crumbling demand due to the COVID-19 crisis and the transition to lower-carbon energy trigger a recalculation of reserves and asset values.
Eni said it expected "post-tax impairment charges against non-current assets, including a devaluation of tax credits recorded in connection with tax-losses carryforwards, of 3.5 billion euros, plus/minus 20%".
It said it would book the writedowns, most of them on upstream assets, in its second-quarter results.
It said it now forecast Brent at $40, $48 and $55 per barrel in the period 2020-2022, respectively, from a previous $45, $55 and $70 per barrel.
Earlier this year Eni pledged to slash its greenhouse gas emissions by 80% in one of the most ambitious clean-up drives in an industry under pressure from investors to go green.
Descalzi confirmed the group's strategy to become a leader in the decarbonization process despite the enduring impacts of the COVID-19 pandemic on the global economy and the group.
"We are assessing how to speed up our plans," he said.
($1 = 0.8844 euros)
(Reporting by Stephen Jewkes; Editing by Giles Elgood)