BP cuts dividend for first time since Deepwater Horizon after huge loss

BP has slashed its dividend payout for the first time since the Deepwater Horizon disaster, after the company’s profits were squeezed by a drop in the price of oil.

Investors will now receive 5.25 US cents (4p) per share, compared with 10.25 cents (7.8p) earlier.

It comes after the oil giant swung to a 6.7 billion US dollar (£5.1 billion) underlying replacement cost loss in the second quarter of the year.

It is a massive hit compared with the same time last year, when it made a 2.8 billion dollar (£2.1 billion) underlying replacement cost profit, but is still around 100 million dollars (£76 million) more than analysts had expected.

The average price of oil was around 57% lower at 29.50 US dollars for a barrel of Brent crude in the quarter compared with the same three months in 2019.

The falling price was driven by a mix of geopolitics as Saudi Arabia and Russia started a price war at the start of the year, and the coronavirus pandemic, which pushed down demand for oil.

It was in part this decrease that two months ago sparked an announcement that BP would write off around 13 billion to 17.5 billion dollars (£9.9 billion to £13.4 billion) after tax.

Chief executive Bernard Looney 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.

“Beneath these, however, our performance remained resilient, with good cash flow and – most importantly – safe and reliable operations.”

Three months ago, amid the doom and gloom of Covid-19, BP surprised many market-watchers by not cutting its payout to shareholders, as its rival Shell had for the first time since the Second World War.

Separately from the results, Mr Looney provided more detail to investors on the company’s new green plans.

By the end of decade he pledged that BP will be investing around five billion dollars (£3.8 billion) in low-carbon projects, a tenfold increase from today.

Over the same period it expects to slash daily oil and gas production by 40% from the levels it was at last year.

While the dividend will remain at 5.25 US cents until the board decides to increase it, Mr Looney and his fellow directors promised to return money to investors by buying back their shares with at least 60% of BP’s surplus cash.