LONDON (Reuters) - Oil giant BP will take a one-off $1.5 billion charge to adjust to new U.S. tax rules, but expects a long-term boost from the corporate-friendly tax rates, it said on Tuesday.
BP’s rival Royal Dutch Shell said last week it would incur a one-off charge of $2-$2.5 billion for the U.S. tax changes.
Like BP, Shell and many other international companies said they expected a long-term positive impact to U.S. earnings from the massive $1.5 trillion tax overhaul that U.S. President Donald Trump signed into law last month. It cuts the corporate rate from 35 percent to 21 percent and temporarily reduces the tax burden for most individuals as well.
But BP said that in the short term, lower tax rates will affect its deferred tax assets and liabilities, resulting in a one-off, non-cash charge of $1.5 billion to its 2017 fourth quarter results which are due to be announced on Feb. 8.
“The ultimate impact of the change in the U.S. corporate income tax rate is subject to a number of complex provisions in the legislation which BP is reviewing,” BP said in a statement.
The British company’s shares closed down about 1 percent on Tuesday.
The adjustment will not affect BP’s cash flow in the fourth quarter.
Exxon Mobil Corp, the world’s largest publicly traded oil producer, declined to comment on how the U.S. tax changes would financially affect it.
Chevron Corp said it was studying the changes but still plans to invest $8 billion in the United States this year.
Deferred tax assets refer in some cases to a company overpaying taxes in advance and then getting them back in the form of tax relief.
BP has large operations in oil and gas production in the Gulf of Mexico and onshore shale operations as well as refineries that can process up to 746,000 barrels per day of crude oil, according to its website.
On Dec. 22, Trump signed the tax overhaul into law, cutting tax rates for businesses and offering some temporary cuts for some individuals and families.
Additional reporting by Arathy S Nair in Bengaluru and Ernest Scheyder in Houston; Editing by David Goodman, Mark Potter and David Gregorio