BP Gains Following Q2 Loss, Dividend Cut on Low-Carbon Plans

Shares of BP gain, even after reporting a second-quarter loss and dividend cut, on optimism over longer-term plans to cut costs and focus on being greener.

Shares of BP  (BP) - Get Report gained on Tuesday, even after reporting a massive second-quarter loss and halving its quarterly dividend, as investors took heart in the energy giant’s longer-term plans to cut costs and focus on being greener.

The London-based energy giant said second-quarter underlying replacement cost profit, which it uses as a proxy for its net earnings results, came in at a record loss of $6.7 billion vs. a net profit of $800 million in the first quarter of the year.

The company's reported loss for the quarter was $16.8 billion, which included a post-tax charge of $10.9 billion for non-operating items. That figure included $9.2 billion in impairment charges, largely due to BP’s revised forecast for oil and gas prices over the next 30 years, and $1.7 billion of exploration write-offs.

The results were a direct hit from the coronavirus pandemic, which pummeled demand for energy in the second quarter, which in turn prompted BP to unveil 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.

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

BP in mid-June said the 'enduring impact' of the coronavirus pandemic was likely to include an acceleration of the pace of transition toward lower carbon energy systems – something that it said it would be proactively dealing with by taking a non-cash impairment charge. 

It also reduced its forecast for Brent crude to $55 a barrel over the next 30 years, down from its previous forecast of $70 a barrel.

Separately, BP announced on Tuesday that it cut its dividend to 5.25 cents a share from 10.5 cents a share for the first three months of the year. BP also said it plans to cut 10,000 global positions, which it expects will make a “significant” contribution to its planned $2.5 billion reduction in annual cash costs by the end of 2021. 

To keep itself liquid, BP said it issued $11.9 billion in hybrid bonds during the quarter. Net debt at the end of the quarter was $40.9 billion, $10.5 billion lower than in the first quarter.

Alongside the second-quarter results, BP on Tuesday unveiled a new strategy that it said will help the firm shift to clean energy – in line with its plan to become a net-zero-carbon company by 2050 or sooner.

The company said that, within 10 years, it plans to raise its annual low carbon investment 10-fold to around $5 billion a year. It also aims to have developed around 50 gigawatts of net renewable generating capacity by 2030 – a 20-fold increase from 2019.

Shares of BP were up 7.06% at $23.65 in trading on Tuesday.