BP slashes its dividend payout to shareholders for the first time since the 2010 Deepwater Horizon disaster as it’s rocked by a plunge in oil prices
BP has slashed its dividend payout for the first time since the Deepwater Horizon disaster as the company is hit by sharply lower global oil prices.
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.
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This repsent a violnet reveral in fortunes compared to last year when the firm booked a $2.8 billion dollar (£2.1 billion) underlying replacement cost profit, but is still $100 million (£76 million) better than analysts had warned.
The average price of oil was around 57 per cent lower at 29.50 US dollars for a barrel of Brent crude in the quarter compared with the same three months in 2019.
The falling price was driven by a mix of geopolitics as Saudi Arabia and Russia started a price war at the start of the year, and the coronavirus pandemic, which pushed down demand for oil.
It was in part this decrease that two months ago sparked an announcement that BP would write off around $13 billion to $17.5 billion (£9.9 billion to £13.4 billion) after tax.
BP chief exeucitve Bernard Looney said the deal was ‘another deliberate step in building a BP that can compete and succeed through the energy transition’
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.’
Three months ago, amid the doom and gloom of Covid-19, BP surprised many market-watchers by not cutting its payout to shareholders, as its rival Shell had for the first time since the Second World War.
Separately from the results, Looney provided more detail to investors on the company’s new green plans.
By the end of decade he pledged that BP will be investing around five billion dollars (£3.8 billion) in low-carbon projects, a tenfold increase from today.
Over the same period it expects to slash daily oil and gas production by 40% from the levels it was at last year.
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% of BP’s surplus cash.