BP slashes losses as oil demand improves

LONDON (AFP) – British energy giant BP yesterday reported a net loss of USD450 million for the third 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 USD16.85 billion in the second quarter.

BP was aided in the third quarter by an absence of huge writedowns coupled with a small recovery in oil demand and steadier prices.

“The underlying business performance in the (third) 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 per cent of its global workforce, after the pandemic caused huge asset writedowns.

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

Prices then rebounded sharply and have traded around USD40 a barrel for some time.

With the market stabilising, BP yesterday announced a quarterly dividend of USD0.0525 per share.

This matched the second-quarter payout, which had been halved from the first quarter – the first 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 USD35 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 USD5 billion.

That has helped BP to reduce net debt to about USD40 billion, while it posted an underlying profit of USD86 million in the third quarter.

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

“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 per cent in morning deals on London’s FTSE 100 index, which was down 0.2 per cent overall.

“Despite the challenges, BP has resisted making further cuts to its dividend, which would have been highly unpalatable to shareholders,” Hargreaves Lansdown Senior Investment and Markets Analyst Susannah Streeter noted.

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.