BP Halves Its Dividend Following Coronavirus Outbreak
Aug 20 2020 Read 213 Times
The COVID-19 pandemic has uprooted the global oil and gas industry and BP hasn’t escaped the fallout. Earlier this month, the energy giant slashed its shareholder dividend by half and posted an enormous US$6.7bn quarterly loss. The announcement was yet another knockback for private shareholders and UK pension funds, who have been hit with an onslaught of cuts since the COVID-19 pandemic sent markets tumbling in February.
"Challenging and uncertain" times for energy industry
The loss was trigged by a devaluation of British Petroleum assets which the company labelled as "challenging and uncertain." The devaluation came in the wake of major cuts to BP oil price forecasts, with the company predicting Brent crude will average around US$55 a barrel until 2050. It’s not just shareholders being hit by the COVID-19 crash, with BP announcing 10,000 job cuts across its global market. Around 2000 of these will be made in the UK.
In the same period last year, BP reported profit of US$2.8bn. The dividend cuts reflect the dire state of the global oil and gas economy, with BP confirming payments will be halved to US5.25 cents a share, compared to the US10.5 cents paid out in the first quarter of 2020. It’s a huge change for the company, which generally offers some of the largest dividend payments in its class of FTSE 100 blue chips.
Oil companies adjust to new normal
BP isn’t the only one tightening its belt, with Royal Dutch Shell also cutting its dividends in April. For Shell, it’s the first reduction in shareholder payments made since WWII. BP hasn’t made cuts of this scale for more than a decade.
According to BP, the cuts are part of a plan to emerge as a “leaner, faster-moving and lower cost organisation.” The company has confirmed its intentions to "pivot" from a conventional oil company to “integrated energy company” with “net zero” carbon emissions by 2050. To do this, it will ramp up investments in renewables, carbon capture, bioenergy and C02 storage technology.
“This coming decade is critical for the world in the fight against climate change, and to drive the necessary change in global energy systems will require action from everyone,” says Bernard Looney, CEO at BP.
Want to know more about what’s ahead for the oil and gas industry? ‘What’s New for Cars: In Terms of Lubricants and Fuels’ spotlights the latest advances in engine and automobile design, with a focus on how the industry is adapting to the changing energy landscape.
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