BP racks up £13bn loss after slump in oil prices hammered its business

BP racks up a £13bn loss in ‘brutal’ year as slump in oil prices hammers business

BP has racked up its biggest-ever annual loss after a slump in oil prices hammered its business.

In an update that underlined the damage inflicted by the pandemic on the industry and wider economy, the FTSE 100 giant plunged £13billion into the red last year.

It was one of the largest losses in corporate history and is the first time BP has been in the red since the Deepwater Horizon disaster a decade ago.

BP has been hit with a slew of one-off costs after Covid lockdowns and travel restrictions triggered a huge drop in demand for oil that is expected to take years to recover

The company was hit with a slew of one-off costs – which included writing down the value of exploration projects by about £12.8billion – after Covid lockdowns and travel restrictions triggered a huge drop in demand for oil. Demand is expected to take years to recover.

The results lay bare the impact of the pandemic, despite BP scrambling to cut costs and halving its prized dividend in a move that dealt a blow to savers and pensioners.

Shares fell 4.5 per cent, or 12.1p, to 255p. The stock is down 44 per cent in the past year.

Rival Shell will publish 2020 figures tomorrow, while US giant Exxon Mobil yesterday posted a loss of £16.3billion, its first for at least four decades.

BP chief executive Bernard Looney described it as ‘an incredibly tough year – the most brutal I can remember in almost 30 years in this industry’.

Looney added: ‘2021 is not getting any easier just yet. But much better days are ahead.

‘And when the vaccines kick in and the world pulls out of the pandemic, we will be ready to really take off.’

BP made a profit of £84million in the final three months of the year, far less than the £270million expected by analysts, as the second Covid wave and subsequent lockdowns triggered another drop in demand for crude oil. 

The annual loss – which contrasts with a profit of £2.6billion in 2019 –was driven by the sharp fall in oil prices that began last February.

After starting 2020 at almost $70 a barrel, Brent crude oil reached a low of $19 in April.

It is trading at around $56 now.

Although the fall hit demand for all BP’s products, it also led the company to revise its long-term price forecasts from $75 a barrel to $55. 

BP believes it will take years for oil demand to recover – though it has previously said this might not happen at all because of the rise in renewable energy.

The company’s boss Bernard Looney said BP had been ‘hit hard’ by the pandemic in 2020, a year when it slashed jobs and dividends in the wake of the pandemic

Looney is pushing for BP to become one of the world’s biggest renewable energy companies and is plotting for it to become carbon neutral by 2050.

He unveiled plans for BP to go green when he took over the helm from Bob Dudley in February weeks before pandemic lockdowns kicked in. 

Looney, 50, is still pushing the overhaul despite the Covid crisis and struck its first deal to go into offshore wind with Equinor last September.

Observers have questioned how much wiggle room the firm will have for big investments amid the slump in oil demand. It is planning to sell £18billion of assets by the middle of the decade and earlier this week announced it was selling a 20 per cent in an Omani gas field for £1.9billion. 

It is axing 10,000 jobs in its 70,000-strong global workforce and has slashed its dividend in half to avoid running up more debt, which stood at £28.5billion in December. 

Although this is a drop from £33billion the year before, the firm warned it will take charges in the first half of 2021 that will send it higher again.

BP has promised to start buying back shares when debt gets to £26billion – which it expects to reach by early next year – but has so far made no promises to raise the dividend.

David Kimberley, analyst at Freetrade, said: ‘The problem for BP and the other oil majors is that they have to contend with managing vast oil empires while constantly reminding shareholders that they’re on the cusp of a green energy revolution that will make them obsolete. 

Looney exemplified this last May when he said we may have already reached peak oil.’

But he added: ‘The trouble with this is that we’ve been told on several occasions that we are about to reach peak oil, going back as far as 1970, and such an event is yet to materialise.’