BP reported a 66 per cent drop in first-quarter earnings and higher debt levels as the collapse in oil demand and crude prices triggered by the coronavirus pandemic took its toll on the UK energy major’s finances.
The company said consumption of refined products had fallen dramatically in March, when governments around the world took more severe measures to curb the spread of the virus.
In the three months to March 31st, underlying replacement cost profits – BP’s definition of net income and the measure tracked most closely by analysts – were $791 million (€728 million), versus nearly $2.4 billion in the same period in 2019.
While it beat consensus estimates at $710 million, shares in the company fell nearly 3 per cent in early trading on Tuesday.
BP, which was confident about its ability to generate more cash at the start of the year, has been thrown into a fresh crisis just as a new chief executive has taken the helm of the company.
“The environment is brutal,” said Bernard Looney in an interview, adding the demand and supply shocks were on an unprecedented scale. BP, the chief executive said, was bolstering its finances and boosting liquidity to lower its break-even price – the level of profitability – to less than $35 a barrel, from $56 a barrel last year.
Lockdowns and travel bans to curb the spread of coronavirus have triggered an oil demand collapse, coinciding with a supply glut and causing an unprecedented crude price drop, forcing the entire sector into cash conservation mode.
On Tuesday morning Brent crude slid 4.3 per cent to $19 per barrel, having dropped below $20 a barrel last week for the first time in almost two decades.