UBS sees multi-billion dollar charge in 2020 from BP restructuring

Analysts at UBS stood by their 'buy' recommendation for shares of BP after the oil major announced plans to reduce its workforce by about 14%, or roughly 10,000 people, the day before.

Nonetheless, it pointed out that the move "won't come cheap" as well as the need to ensure it did not lose human capital and 'know-how'.

Because the "biggest impact" would borne by the highest ranks and severance packages were expected to "substantial", UBS anticipated a "meaningful" multi-billion dollar special charge in 2020 and cash out sum in 2020 and 2021.

The total cost to the company of its 72,500 employees, both for salaries and otherwise, was $9.8bn in 2019.

Nevertheless, BP did not look overstaffed in comparison to peers, UBS added, although competitors, such as Shell and Chevron, were expected to undertake similar measures.

"Where the industry needs to be careful is in losing too much human capital and expertise – an issue that has been a problem in the past in the aftermath of a cyclical downturn.

"Like many of the individual measures taken by companies in response to the operating environment (both Covid but also more structural challenges), context will need to be provided and BP will need to join the dots at its strategy event over 14-16 September."

UBS kept its target price at 410.0p.