TOP NEWS: BP Halves Payout After Swinging To Huge Loss On Covid-19

(Alliance News) - BP PLC on Tuesday followed in the footsteps of rival Royal Dutch Shell PLC in ...

Alliance News 4 August, 2020 | 8:55AM
Email Form

(Alliance News) - BP PLC on Tuesday followed in the footsteps of rival Royal Dutch Shell PLC in cutting shareholder payout, after the UK oil major swung to an interim loss amid the challenging trading conditions created by the coronavirus pandemic.

It was the first time BP cut its dividend since the Deepwater Horizon disaster in 2010.

In April, Anglo-Dutch oil major Shell cut its dividend for the first time since the Second World War as the sector grapples with lower oil prices due to Covid-19.

Brent oil was quoted at USD43.83 a barrel on Tuesday morning, lower from USD44.11 late Monday. The North Sea benchmark was trading at around USD66 a barrel at the start of 2020.

BP also separately set out its strategy for the next decade of delivery towards net-zero ambitions.

Within 10 years, London-based BP plans to increase its annual low carbon investment 10-fold to around USD5 billion a year, building out an integrated portfolio of low-carbon technologies, including renewables and bioenergy. Over the same period, the company's oil and gas production is expected to reduce by at least one million barrels of oil equivalent a day, or 40%, from 2019 levels. Its remaining hydrocarbon portfolio is expected to be "more cost and carbon resilient".

Shares in BP were up 6.2% at 298.33 pence each in London on Tuesday morning, the best performer in the FTSE 100 index. Year-to-date the stock has shed 37% in value.

For the half-year ended June 30, BP swung to a replacement cost loss of USD18.29 billion from a profit of USD3.78 billion a year before. Adjusted replacement cost loss for the interim period totalled USD5.89 billion versus a profit of USD5.17 billion.

First-half pretax loss amounted to USD26.13 billion versus USD7.93 billion profit. Revenue declined 36% to USD90.73 billion from USD141.15 billion.

For the second-quarter to June-end, BP recorded a pretax loss of USD21.60 billion versus USD3.15 billion profit a year ago. Revenue fell 58% to USD31.19 billion.

"The result was driven primarily by non-cash Upstream exploration write-offs - USD6.5 billion after tax - principally resulting from a review of BP's long-term strategic plans and revisions to long-term price assumptions, combined with the impact of lower oil and gas prices and very weak refining margins, reduced oil and gas production and much lower demand for fuels and lubricants," BP explained.

BP declared a quarterly dividend of 5.25 US cents per share, down 50% from 10.50 cents per share for the previous quarter.

The company said the payout is aligned with its new distribution policy, which comprises of a fixed quarterly payout of 5.25 cents and a commitment to return at least 60% of surplus cash flow to shareholders via share buybacks once net debt is reduced to USD35 billion.

Net debt at June 30 was USD40.9 billion, USD10.5 billion lower than in the first-quarter.

"These headline results have been driven by another very challenging quarter, but also by the deliberate steps we have taken as we continue to reimagine energy and reinvent BP. In particular, our reset of long-term price assumptions and the related impairment and exploration write-off charges had a major impact. Beneath these, however, our performance remained resilient, with good cash flow and - most importantly - safe and reliable operations," said Chief Executive Bernard Looney.

Looking to the third quarter of 2020, BP expects higher product demand, but still significantly below last year's levels. The company also expects significant continued pressure on industry refining margins into the third quarter.

The oil producer said the Covid-19 pandemic continues to create a volatile and challenging trading environment.

By Tapan Panchal; tapanpanchal@alliancenews.com

Copyright 2020 Alliance News Limited. All Rights Reserved.

Email Form

Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Rating
BP PLC 233.30 GBX 0.39
Royal Dutch Shell PLC B 972.10 GBX -0.61
Royal Dutch Shell PLC Class A 1,004.80 GBX -0.91 -

About Author

Alliance News

Alliance News provides Morningstar with continuously updating coverage of news affecting listed companies.

Audience Confirmation


By clicking 'accept' I acknowledge that this website uses cookies and other technologies to tailor my experience and understand how I and other visitors use our site. See 'Cookie Consent' for more detail.

  • Other Morningstar Websites
© Copyright 2020 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Cookies