BP cut its dividend for the first time in a decade after a record $6.7bn (€5.7bn) second-quarter loss, when the coronavirus crisis hammered fuel demand, and it sought to win over investors by speeding up its reinvention as a lower carbon company. Its shares rose more than 7%, however, after BP unveiled earlier than expected a plan to reduce its oil and gas output by 40% and boost investments in renewable energy, such as wind and solar, over the next decade.
All major oil companies suffered in the second quarter as lockdowns to contain the new coronavirus limited travel and oil prices fell to their lowest in two decades. Several, including Royal Dutch Shell and Norway’s Equinor cut their dividend in response.
BP CEO Bernard Looney, who took the helm in February, avoided a dividend cut in the first quarter despite worsening market conditions and as rivals reduced their payouts. But the 50% cut by BP to 5.25 cents per share, which was larger than the 40% forecast by analysts, became inevitable given a large debt pile, the collapse in oil and gas demand, and growing expectations for a sluggish global economic recovery.
BP’s net loss was in line with analysts’ expectations and was largely a result of the company’s decision to wipe $6.5bn off the value of oil and gas exploration assets after it revised its price forecasts. BP recorded total impairments of $17.4bn, at the upper end of its previous guidance.
It said it would increase its low-carbon spending ten-fold by 2030 versus current levels to $5 billion a year out of a total budget of around $15bn and boost its renewable power generation to 50 gigawatts. Over the same timeframe, it plans to shrink its oil and gas production by at least 1 million barrels of oil equivalent per day compared with 2019.