BP halves dividend in record loss as coronavirus pandemic bites oil giant
Oil giant BP slashed its dividend today for the first time since the Deepwater Horizon disaster a decade ago.
The dividend cut is a major blow for UK pension funds, many of whom have large shareholdings in BP.
The decision comes after the oil major posted a multi-billion loss as oil prices tumbled over the period as a result of crumbing demand.
For the second quarter the company will pay out $5.25 cents per share, half of what it paid in the first quarter.
Losses came in at $6.68 billion (£5.1 billion), compared with profits of $2.8 billion a year earlier and $791 million in the first quarter this year.
The loss was largely due to BP writing down the value of its assets after it cut its oil price forecasts in June.
Chief executive Bernard Looney, who took the helm in February, had managed to avoid a dividend cut earlier this year despite worsening market conditions.
Looney said: “The coronavirus pandemic has hit prices and demand. The decision reflects the uncertainty coronavirus has caused. It is the right thing to do."
Rival Royal Dutch Shell cut its dividend for the first time since World War Two back in April.
Analysts said Looney had little choice but to cut this time around as oil prices fell by 50% in the second quarter as Saudi Arabia and Russia started a price war, while the coronavirus pandemic pushed down demand from airlines and other major industries.
BP expects demand for oil to be up to nine million barrels per day lower compared to last year.
Richard Hunter, head of markets at Interactive Investor, said: “BP has finally bitten the dividend bullet. The sustained fall in the oil price and demand destruction arising from the pandemic has taken its toll."
BP also set out plans for how the company aims to be a net zero emitter by 2050.
By the end of this decade Looney promised that BP will be investing $5 billion dollars in low-carbon projects, a tenfold increase from today.
Over the same period BP also expects to slash daily oil and gas production by 40% from the levels it was at last year.
The company added it will not take on any new exploration projects.
Looney added: "This is a big change because the world is changing. We need to change what we offer the world. This will be a very different company in ten years time."
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