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The UK-based oil and gas company posted underlying first quarter replacement profit, used as a proxy for net earnings, of $ 800 million. That compared to $ 2.4 billion in the first quarter of 2019, reflecting a 67% drop.
Analysts had expected underlying replacement cost earnings in the first quarter to be $ 987 million, according to data compiled by Refinitiv.
“A good quarter but, without a doubt, a very brutal environment,” BP CEO Bernard Looney told CNBC “Squawk Box Europe” on Tuesday.
BP’s results come shortly after a historic drop in oil prices. The US West Texas Intermediate’s May contract fell below zero to trade in negative territory for the first time in history last week. The transaction volume was low as it was the day before the contract expiration date, but the decline was nonetheless unprecedented.
WTI futures had brought in more than $ 60 a barrel at the start of the year. A dramatic drop in demand following the coronavirus epidemic has driven down oil prices.
WTI’s June contract traded at $ 10.44 a barrel on Tuesday, down more than 18% for the session, while the international benchmark was down at $ 19.44 a barrel. ‘about 3%.
“The real situation we have here is a basic supply and demand situation,” said Looney. “We expect demand for the second quarter to drop by around 16 million barrels a day worldwide this year. And that is about five times the destruction of the previous demand we experienced during the global financial crisis from 2008 to 2009. “
BP shares, which fell 1.5% in morning trades, have fallen by around 35% since the start of the year.
BP’s debt reached $ 51.4 billion at the end of the first quarter, up $ 6 billion from the previous quarter. And the company’s debt-to-capital ratio, or gearing, jumped to 36% in the first three months of the year.
The company also announced a dividend of 10.5 cents per share announced for the quarter.
“BP’s board of directors reviewed the dividend in the first quarter as usual and reviewed it in its entirety and the decision was made to pay this dividend based on the underlying performance of the business in the first quarter and depending on the actions we take, “Looney told CNBC on Tuesday.
Bernard Looney, Upstream CEO of BP Plc, speaks during the CERAWeek by IHS Markit 2019 conference in Houston, Texas, United States, Wednesday, March 13, 2019.
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Last week, Norwegian company Equinor became the first major oil company to cut its dividend this season, raising concerns that other oil majors may follow suit.
“Many retail investors will sigh that BP has agreed to pay a dividend,” Stuart Lamont, chief investment officer at Brewin Dolphin, told CNBC by email.
“There had been a lot of debate about what it would not mean for income investors, who will now have a close eye on Royal Dutch Shell’s results later this week,” said Lamont.
Net zero by 2050
On February 12, Looney of BP released a statement called “Reimagining Energy, Reinventing BP”. He described the long-term goal of the energy company to be a zero net business by 2050 “or sooner.”
Asked if the continued impact of the coronavirus crisis had changed his outlook for the business, Looney said there were three reasons why he was now “even more” determined to pursue this goal .
“First, I don’t think this pandemic is doing anything, but adding to the challenge for the oil outlook in the future,” said Looney.
“The second is that I think it reminded people in society of the fragility of our ecosystem … People are looking at a clear sky and the beauty of it and I think, although we have different priorities right now, I think people will be very focused on this in the medium term, “he continued.
“Finally, we talked about negative WTI prices last week, Lightsource BP, of which we are a 50% shareholder … is leasing contracts for 400 megawatts of solar power in the United States. So there is something in this sector that I think offers a real attractive proposition to investors and resists very well at times like this, “added Looney.