UK's BP has reported big losses of US$16.8 billion for the second quarter as it halves its dividend and lays out a new 10 year energy strategy to deliver its net-zero ambition.
The reported loss of $16.8 billion compares with a profit of $1.8 billion for the same period in 2019. BP had second-quarter underlying losses of $6.7 billion, with the main hit coming from $17.4 billion of impairments and exploration write-offs.
“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 cashflow and – most importantly – safe and reliable operations,” Bernard Looney chief executive officer said.
BP also announced a new dividend structure. The dividend has been reset to 5.25 cents per share per quarter (compared to 10.5 cents per share for the previous quarter) and intends to remain fixed at this level. It is the first time BP has cut its dividend since the Gulf of Mexico disaster ten years ago.
BP also introduced a new strategy alongside its results that will reshape its business as it pivots from being an international oil company focused on producing resources to an integrated energy company focused on delivering solutions for customers.
Looney explained: “BP has been an international oil company for over a century - defined by two core commodities produced by two core businesses. Now we are pivoting to become an integrated energy company - from IOC to IEC. From a company driven by the production of resources to one that that’s focused on delivering energy solutions for customers.
Within 10 years, BP said it aims to have increased its annual low carbon investment 10-fold to around $5 billion a year, building out an integrated portfolio of low carbon technologies, including renewables, bioenergy and early positions in hydrogen and CCUS. By 2030, BP aims to have developed around 50GW of net renewable generating capacity – a 20-fold increase from 2019 – and to have doubled its consumer interactions to 20 million a day.
Over the same period, BP’s oil and gas production is expected to reduce by at least one million barrels of oil equivalent a day, or 40 per cent, from 2019 levels. BP will also make no exploration in new countries.
By 2030, BP aims for emissions from its operations and those associated with the carbon in its upstream oil and gas production to be lower by 30-35 per cent and 35-40 per cent respectively.
“Energy markets are fundamentally changing, shifting towards low carbon, driven by societal expectations, technology and changes in consumer preferences. And in these transforming markets, BP can compete and create value, based on our skills, experience and relationships. We are confident that the decisions we have taken and the strategy we are setting out today are right for BP, for our shareholders, and for wider society.” Helge Lund, chairman.
Speaking after BP's Q2 earnings announcement, Luke Parker, Wood Mackenzie Vice President - Corporate Analysis, said:
"Today’s strategy update marked a big step forward, filling in many of the blanks, including detailed guidance to 2030. It leaves stakeholders with a much clearer of idea of where BP is headed over the next decade, how it will to get there and what that means for the value proposition.
"We said back in February that no company of BP’s stature had gone as far, or committed so unequivocally, to transforming itself in the face of the energy transition. The guidance that BP laid out today brings that transformation to life – makes it real. It constitutes the clearest and most detailed roadmap to Big Energy that any of the Majors have provided to this point.
"BP's oil and gas business will shrink dramatically, while the low carbon business will grow strongly.
“But if ever there was a moment to reset, this was it. Several factors have converged to make it possible: coronavirus and everything that comes with it; a strategic pivot to net-zero on the horizon; Shell’s dividend reset; a new leadership with credit in the bank. Our view is that BP has taken the prudent course of action."