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BP cuts dividend for the first time in a decade

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Written by: Emma Lunn
04/08/2020
The oil giant halved its payout to 5.25 cents (4p) from 10.5 cents (8p) – its first cut since 2010.

BP has cut its dividend for the first time since the Deepwater Horizon oil spill in 2010 as the pandemic hammered energy demand.

The shareholder payout in Q2 2020 will be 5.25 cents per share, down from 10.5 cents, after BP reported a record loss of $16.8bn (£12.8bn), compared with a profit of $1.8bn (£1.37bn) for the same period last year.

The heavy financial loss included a $9.2bn (£7bn) post-tax writedown on the value of its oil and gas assets after the company revised its oil price forecasts in the wake of the pandemic. Coronavirus has seen oil demand fall to 25-year lows.

Bernard Looney, BP’s chief executive, said: “These headline results have been driven by another very challenging quarter, but also by the deliberate steps we have taken as we continue to reimagine energy and reinvent BP.

“In particular, our reset of long-term price assumptions and the related impairment and exploration write-off charges had a major impact.”

The decision to cut BP’s dividend for the first time in a decade comes just months after Royal Dutch Shell slashed its shareholder dividend for the first time since the second world war.

Dividends across the board fell by 57% in Q2 2020, with oil sector cuts totalling £2.2bn in the second quarter, according to analysis by global financial administrators Link Group.

Richard Hunter, head of markets at interactive investor, said: “The sustained fall in the oil price and demand destruction arising from the pandemic has finally taken its toll. With oil still down 34% in the year to date, refining margins have reduced to a trickle. Meanwhile, the effects of lockdown on demand were severe, with general travel and aircraft standing idle exacerbating what was already an oversupplied market.

“At the same time, the pandemic seems to have focused the collective mind on a renewed push towards alternative energies, which affects the oil majors both in terms of the costs of maintaining existing exposure to oil, as well as ramping up the production of renewable sources. While this is a longer-term challenge, the pace of change may well have significantly accelerated as global economies and consumers adjust to a different world.

“Against this backdrop, BP has joined its peers in taking a red pen to its forecasts. A quarterly charge of $10.9bn leads to a cumulative half-yearly impairment of $12.2bn, driven by the decline in the oil price itself, lower longer-term price assumptions, revised demand projections and ongoing pressure on refining margins.”

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