BP slashes its dividend as it's rocked by a plunge in oil prices - and says it will cut oil and gas production by 40% in a decade
- BP investors will now receive just 5.25 US cents (4p) per share
- The oil giant reported a $6.7 billion (£5.1 billion) underlying loss
- Average price of oil was 57 per cent lower at $29.50 for a barrel of Brent crude
BP has slashed its dividend payout for the first time since the Deepwater Horizon disaster after the company was hit by sharply lower global oil prices.
The energy giant also announced it will up its spending on low-carbon projects tenfold by the end of the decade and slash oil and gas production by 40 per cent by 2030.
BP investors will now receive just 5.25 US cents (4p) per share, compared with 10.25 cents (7.8p) last time around.
The cut came as the oil giant swung to a $6.7 billion (£5.1 billion) underlying loss in the second quarter of the year.
BP investors will now receive just 5.25 US cents (4p) per share, compared with 10.25 cents (7.8p) last time around
This represents a sharp reversal in fortunes compared to last year when the firm booked a $2.8billion (£2.1billion) underlying replacement cost profit.
This is still $100million (£76million) better than analysts had warned however.
This beating of forecasts has been reflected in BP shares today, with a rise of 7 per cent, despite the dividend cut. Shares closed 3.4 per cent higher at 290p on Tuesday.
The average price of oil was 57 per cent lower at $29.50 for a barrel of Brent crude in the quarter compared with the same three months in 2019, BP said.
The falling price was driven by a mix of Saudi Arabia and Russia engaging in a price war at the start of the year and the coronavirus pandemic, which pushed down demand for oil.
Three months ago, as the pandemic gripped the world BP held back from cutting its payout to shareholders, as rival Shell was forced to do.
Chief executive Bernard Looney said: '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.'
Looney also provided more detail to investors on the company's plans to go green.
He pledged that BP will be investing around $5billion dollars (£3.8 billion) in low-carbon projects by the end of the decade, a tenfold increase from today.
Over the same period it expects to slash daily oil and gas production by 40 per cent from last year's level.
Chief executive Bernard Looney said the results have been driven by 'another very challenging quarter'
While the dividend will remain at 5.25 US cents until the board decides to increase it, Looney and his fellow directors promised to return money to investors by buying back their shares with at least 60 per cent of BP's surplus cash.
Richard Hunter, head of markets at Interactive Investor, commented: 'Amid a planned longer term radical overhaul of the business, BP has finally bitten the dividend bullet.'
'The sustained fall in the oil price and demand destruction arising from the pandemic has finally taken its toll. With oil still down 34 per cent in the year to date, refining margins have reduced to a trickle.
'Meanwhile, the effects of lockdown on demand were severe, with general travel and aircraft standing idle exacerbating what was already an oversupplied market.'
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