BP slashes losses as oil demand improves

British energy giant BP on Tuesday, October 27, reported a net loss of $450 million for the 3rd quarter, down very sharply on the previous quarter’s mammoth losses due to the coronavirus pandemic.

The loss after tax for the July-September period compared with a net loss of $16.85 billion in the 2nd quarter.

BP was aided in the 3rd quarter by an absence of huge write-downs coupled with a small recovery in oil demand and steadier prices.

“The underlying business performance in the [3rd] quarter remained resilient and we made substantial progress in strengthening our balance sheet,” BP chief financial officer Murray Auchincloss said in the earnings statement.

BP is axing 10,000 jobs, or 15% of its global workforce, after the pandemic caused huge asset write-downs.

After companies worldwide closed their doors and airlines grounded planes at the height of the COVID-19 outbreak towards the end of the 1st quarter, oil prices dropped off a cliff, even briefly turning negative.

Prices then rebounded sharply and have traded around $40 a barrel for some time.

With the market stabilizing, BP on Tuesday announced a quarterly dividend of 5.25 US cents per share.

This matched the 2nd quarter payout, which had been halved from the 1st quarter – the 1st cut since the Deepwater Horizon oil rig disaster in 2010 that damaged BP’s finances and reputation.

“Funding the dividend remains our first priority and we are confident in moving towards our $35-billion net debt target, supported by value accretive divestments,” Auchincloss said.

The company earlier this year agreed the sale of its petrochemical business to privately-owned rival Ineos for $5 billion.

That has helped BP to reduce net debt to about $40 billion, while it posted an underlying profit of $86 million in the 3rd quarter.

“The ongoing impacts of the COVID-19 pandemic continue to create a volatile and challenging trading environment,” BP said on Tuesday. 

“The gradual recovery in oil demand seen since the spring looks set to continue, led by strengthening demand in Asia,” it added.

BP’s share price rose 1.8% in morning deals on London’s FTSE 100 index, which was down 0.2% overall.

“Despite the challenges, BP has resisted making further cuts to its dividend, which would have been highly unpalatable to shareholders,” noted Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

Transforming BP

The dividend cut, asset sales, and job losses have been carried out by Bernard Looney, who became chief executive in February as the coronavirus began taking hold worldwide.

He wants BP to achieve “net zero” carbon emissions by 2050, helped by an expected drop in oil and gas production that is pushing energy majors worldwide to up their game regarding cleaner, sustainable energy sources such as electricity and wind power.

“Having set out our new strategy in detail, our priority is execution and, despite a challenging environment, we are doing just that – performing while transforming,” Looney said in Tuesday’s statement. 

“Major projects are coming online, our consumer-facing businesses are really delivering, and we remain firmly focused on cost and capital discipline,” he added. – Rappler.com