BP reports Q2 net loss of $16.8 billion on huge impairments, dividend halved

BP reported a net loss of $16.8 billion for the second quarter of 2020, compared with a profit of $1.8 billion for the same period a year earlier. The current quarter’s loss includes a net post-tax charge of $10.9 billion for non-operating items. The breakdown of this figure includes $9.2 billion in post-tax non-cash impairments arising from the revisions to its long-term price assumptions and $1.7 billion of post-tax non-cash exploration write-offs treated as non-operating items (OGJ Online, June 15, 2020).

Operating cash flow for the quarter, excluding Gulf of Mexico oil spill payments, was $4.8 billion, including a $1.5 billion working capital release (after adjusting for net inventory holding gains). Gulf of Mexico oil spill payments in the quarter of $1.1 billion on a post-tax basis included the scheduled annual payment.

Proceeds from divestments and other disposals received in the quarter were $1.1 billion. This included the first payment from the agreed sale of BP’s petrochemicals business to INEOS, which delivered BP’s plans for $15 billion of announced transactions a year earlier than expected. The sale of the upstream portion of BP’s Alaska business also completed at the end of the quarter.

Organic capital expenditure in the first half of 2020 was $6.6 billion, on track to meet BP’s revised full year expectation of around $12 billion, announced in April (OGJ Online, Apr. 1, 2020).

BP’s redesign of its organization to become leaner, faster moving and lower cost, including the announced reduction of around 10,000 jobs, is expected to make a significant contribution to the planned $2.5 billion reduction in annual cash costs by the end of 2021, relative to 2019. Restructuring costs of around $1.5 billion are expected to be recognized in 2020.

During the quarter BP issued $11.9 billion in hybrid bonds—a significant step in diversifying its capital structure, supporting its investment grade credit rating, and strengthening its finances, it said.

Net debt at the end of the quarter was $40.9 billion, $10.5 billion lower than in the first quarter. Gearing at the end of the quarter was 33.1% compared with 36.2% at the end of the previous quarter. This reflected the increase in equity associated with the issuance of hybrid bonds and the lower net debt, partly offset by the reduction in equity associated with the second-quarter loss.

A dividend of 5.25¢ per share was announced for the quarter, compared to 10.5¢ per share for the previous quarter. This dividend decision is aligned with BP’s new distribution policy announced separately.