BP reported an annual loss for the first time in a decade after a “brutal” year in which the Covid-19 pandemic took its toll on the global oil industry.
The oil company reported an underlying loss of $5.7bn (£4.2bn) for last year, compared with a profit of almost $10bn in 2019, after the pandemic cut demand for transport fuels, and caused oil prices on the global market to tumble.
BP was forced to write off the value of its oil and gas assets by a total of $6.5bn last year after slashing its expectations for oil prices over the long-term. It also cut its global workforce by 10,000 and reduced its shareholder dividend for the first time since the Deepwater Horizon disaster last year, while its share price plunged to a 26 year low.
The company’s annual loss including the writedown and other non-operating charges was $18.1bn for the year, the worst financial result since it reported a $4.9bn loss following the Deepwater Horizon disaster and one of worst ever recorded.
All major oil companies struggled last year as coronavirus restrictions kept a lid on slowly rising global oil prices, which have been kept afloat by a pact between the Opec oil nations to limit oil production.
The price of Brent crude has recovered from below $20 a barrel in April last year to more than $55 a barrel, but the market remains well below highs of almost $75 a barrel in 2019. BP has cut its forecasts for oil prices over the coming decades to an average of $55 a barrel between 2021 and 2050, down by almost a third from its forecasts before the pandemic.
In the final quarter of a “brutal” year for BP, it reported a modest underlying profit of $115m, which was well below analyst forecasts of a $360m profit and a fraction of the $2.5bn reported for the same months in 2019.
BP chief executive, Bernard Looney, said the “tough quarter at the end of an incredibly tough” year was “the most brutal I can remember in almost 30 years in this industry”.
BP’s share price tumbled nearly 5% on Tuesday to 254p as equity analysts digested the worse than expected financial results, and the company’s slow progress on reducing its almost $40bn debt pile last year.
“We expect much better days ahead for all of us in 2021,” Looney said.
Last year was “pivotal” for BP which bowed to growing pressure to act on its climate impact by setting a target to become a net zero carbon company by 2050, and has set in motion plans to cut its costs and reduce its debt. BP plans to increase its renewable energy portfolio from 3.2 gigawatts (GW) to 50GW by 2030, while producing less oil and gas to help cuts its contribution to the global climate crisis.
Susannah Streeter, a senior analyst at Hargreaves Lansdown, said: “Turning a tanker around with a storm raging was never going to be an easy manoeuvre and these numbers underline just how difficult the conditions are for BP as it attempts a rapid energy transition amid sunken oil demand.”
The company is more than half way towards its target to sell off $25bn-worth of assets by 2025 to help fund its green plans, and expects divestments worth between $4bn to $6bn in the year ahead. The sales are also expected to help pay off BP’s net debt, which fell to $39bn at the end of 2020, down $1.4bn over the quarter and $6.5bn over the full year.
“The focus for the company in the longer term will be on making the most of its remaining oil fields while investing in a low carbon future,” Streeter said, “But it will be like walking a tight rope for the business.’’