BP stock rose 6.7% on Tuesday, even after the oil giant cut its dividend for the first time in a decade after registering a second quarter loss of $ 16.8 billion.
However, the oil chief beat expectations and revealed to investors a new green strategy to cut oil and gas production by 40% a year by 2030 and raise low-carbon investment tenfold to $ 5 billion.
BP (ticker: BP) warned in June that it expected a fee of between $ 13 billion to $ 17.5 billion in the second quarter, as it lowered long-term oil price forecasts and carbon by 2050 But took the strategy of becoming a net zero. The British energy giant also announced a review of plans to develop some of its oil and gas exploration sites, and said it would cut 10,000 jobs worldwide following the global downturn in oil demand.
what’s new. BP’s numbers confirmed the sector’s second-quarter misery, as the company reported an underlying loss of $ 6.7 billion, up from a $ 2.8 billion gain in the year-ago period. Strong performance in its oil trading division beat expectations.
The London-headquartered multinational reduced its long-term oil and gas price perceptions, as it warned that weak demand for energy could remain for a “sustained period”. It is now expected that Brent crude prices will remain between $ 50 and $ 60 per barrel from the previous estimate of $ 70 over the next 30 years. As a result, the company took a $ 9.2 billion write-down on the value of its assets, while a review of exploration prospects resulted in a write-down of $ 1.7 billion. BP reported a total loss of $ 17.4 billion.
Quarterly dividend deduction reduced from -10.5 cents per share to 5.25 cents per share – no surprise. The major surprise occurred in the first year when BP stuck to its dividend in the first quarter, while rival Royal Dutch Shell (RDS.A) cut shareholder payments for the first time since World War II. For the US holders of BP’s ADR, the dividend was reduced from 63 cents per quarter to 31.5 cents per cut. ADR still has a yield of about 5%.
looking ahead. BP’s dividend cut was fully expected, so investors largely ignored it. In fact, the 50% dividend cut is less severe than Shell, which cut its payments by two-thirds in April. The company’s ambitious axis towards a low-carbon future and plans to spend billions over the next 10 years are also eyeing.
As bad as the second quarter was, BP also lived up to expectations and posted a spectacular performance in its business operations. “The announcement that BP made this morning involving a write-down of its asset valuation, which was not expected by analysts, was worse than the relief,” said AJ Mold investment director Ros Mold. “And the benefit of being involved in almost every aspect of the oil market showed a strong performance from its trading division as it benefited from all the volatility,” he said.
BP’s dividend cut and new green strategy suggest that it is ultimately facing challenges ahead, but it may not make those challenges easier.
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