The collapse in oil demand due to the coronavirus pandemic led BP to a loss of 628 million dollars (505 million pounds sterling) for the first quarter, against a profit of 2 billion dollars at the same period l last year.
BP said “exceptionally difficult” market conditions lowered profits from the company’s underlying replacement costs, its preferred profit measure, by two-thirds to $ 791 million for the quarter, down from 2, $ 35 billion last year.
The oil giant has told investors it faces “an exceptional level of uncertainty” and the risk of “more lasting consequences” to come, including higher debt, lower spending and downsizing.
But the energy company FTSE 100 will still pay shareholders, including thousands of retail and pension investors, a dividend for the past three months.
“Our industry has been hit by supply and demand shocks on a scale never seen before, but this is no excuse to go inward,” said BP boss Bernard Looney. “It is brutal, the future is unknowable, but I am also confident that we will be able to get through this.”
BP will maintain its dividend for shareholders for the quarter with a payment of 10.5 cents per share, up 2.4% from the payment in the first quarter of last year, amid growing speculation that Big oil companies will have to break a long-standing taboo by cutting dividends to survive the coronavirus crisis.
BP has only reduced its dividend twice in the past 30 years, the latest in the wake of the Deepwater Horizon tragedy in 2010, which resulted in 11 deaths and financial costs of more than $ 65 billion.
“We have been tested several times in our history. But we are still responding and we know how to respond, ”Looney told investors.
The oil market crisis, which has brought prices down to 21-year lows and even turned negative in the United States, has emerged as BP prepares to undertake a major corporate overhaul to push it toward ambition. ‘be’ net zero ‘by 2050.
Looney told The Guardian that no BP employee will leave the company in the next three months, though job cuts are expected by the end of the year as part of the planned restructuring that remains on the right track.
Analysts have warned that BP’s commitment to the dividend could come at a cost.
BP’s debt has climbed nearly $ 6 billion in recent months to $ 51.4 billion in the first quarter. Analysts predict it will continue to increase over the year.
“The key question at this point is how far BP is willing to push the balance sheet to protect its dividend,” said Biraj Borkhataria, analyst at RBC Capital. “As if that were the case, he would likely spend the rest of 2020 and 2021 trying to pay down his debt. “
BP also announced a 25% reduction in spending in response to the coronavirus epidemic to around $ 12 billion by 2020, and new borrowing facilities to increase its liquidity.
Nicholas Hyett, equity analyst at Hargreaves Lansdown, said that “drastic cuts” in BP’s spending plans “should help ease the pressure for now.”
“But in the longer term, the group needs higher oil prices or lower operating costs, and ideally both. “
BP expects to be able to drastically cut costs in order to balance its pounds, even from a steady oil price of $ 56 per barrel last year to $ 35 per barrel in 2020.
The average price of oil in the first quarter of the year was $ 50 per barrel, compared to $ 63 per barrel in the first quarter of 2019. Last week, the price of Brent crude, the international benchmark for oil prices, fell at $ 16 a barrel.