London — BP warned Tuesday of "exceptional" uncertainty over oil and gas demand and a risk of long-term consequences from the current market turmoil as it wrote down the value of its own inventories by $3.7 billion and cut its output expectations for this year.

In a Q2 results statement, the UK oil and gas major said it expected its previously announced 25% cut in capital expenditure to reduce its upstream oil and gas output by 70,000 b/d of oil equivalent this year as it curtails developments in lower-margin areas and rephrases projects in the early stages of development.

It also said its second-quarter oil and gas production would be lower than its first-quarter output, which was down 3% on the year at 2.60 boe/d, excluding its stake in Rosneft.

However, the company said its forecast even for second-quarter production was subject to high uncertainty. "There are significant uncertainties with regard to the implementation of OPEC+ restrictions, price impacts on entitlement volumes, divestments, market restrictions given lack of demand for oil and COVID-19 operational impacts," BP said.

"Looking forward, there remains an exceptional level of uncertainty regarding the near-term outlook for prices and product demand, particularly while many economies remain under lockdown," BP said. "There is the risk of more sustained consequences depending on the efforts of governments and the public and private sectors to manage the health, economic and financial stability effects of the pandemic."

The company took a big financial hit in its results, with its debt levels ballooning. It reported an outright first-quarter loss of $4.4 billion, reflecting the cut in its inventory values.

However, new CEO Bernard Looney, noting BP's already announced capex cut, said: "We are taking decisive actions to strengthen our finances — reinforcing liquidity, rapidly reducing spending and costs, driving our cash balance point lower."

S&P Global Platts