BP (BP.L) saw its profits slide by 66% in the first quarter of the year, as its CEO warned the coronavirus had caused oil supply and demand shocks “on a scale never seen before.”
With the sector reeling from a collapse in global demand, BP saw its preferred measure of underlying replacement cost profit tumble to $791m (£635m) in the first quarter, down from $2.36bn a year earlier.
Without an adjustment for ‘non-operating’ items and fair value accounting, it slid to a $628m loss, down from a $2.1bn profit in the first quarter of 2019.
The figures come as oil prices tumbled again on Tuesday, with June West Texas Intermediate futures (CL=F) down 18.94% to $10.36 per barrel. Fears are growing that an excess in supply could overwhelm storage facilities and force the price of oil futures into negative territory again. At $18.88 per barrel, Brent crude (BZ=F) was trading more than 5.5% lower on Tuesday.
BP still announced it would go ahead with a payout to shareholders in June, announcing a dividend of just over $0.10 per ordinary share, up 2.4% on the previous year. Many other companies have scrapped or lowered dividends in the wake of the coronavirus pandemic.
Its first-quarter results highlighted the significant challenges rippling through the industry. It said demand had slumped “sharply,” particularly in the transport industry. “The resulting reduction in demand for crude oil has begun to put severe pressure on storage and logistics, with a substantial effect on prices and has promoted volatility,” it said.
The storage crisis saw crude prices turn negative earlier this month for the first time in history, as traders rushed to sell off contracts close to fulfillment with nowhere to store the oil.
The recent OPEC agreement alongside other oil producers on supply cuts will “help reduce the imbalance but are unlikely to prevent material supply shut ins,” it added.
It said there was “exceptional” uncertainty about the outlook for demand and prices particularly while so many countries remain under lockdown. “It is difficult to predict when current supply and demand imbalances will be resolved and what the ultimate impact of COVID-19 will be.”
BP warned of the “risk of more sustained consequences,” which it said depended on governments’ policy choices without giving further details.
CEO Bernard Looney said: “Our industry has been hit by supply and demand shocks on a scale never seen before, but that is no excuse to turn inward. We are focusing our efforts on protecting our people, supporting our communities and strengthening our finances.”
He said the company was “rapidly reducing” costs and spending, with the aim to bring its break-even point below $35 a barrel in 2021.
It comes as the UK oil and gas industry’s main trade body OGUK also warned on Tuesday up to 30,000 jobs could be lost in the sector as a result of the coronavirus pandemic. It said a “dramatic reduction” in revenue raised serious concerns about the ability of some firms to survive the downturn.
The body said that the downturn was likely to be more severe than that seen in the wake of the 2015 oil price crash, which threatened the future of the North Sea oilfields. Noting that many areas of the supply chain were “increasingly fragile,” OGUK said that revenues and margins across the sector could fall by as much as 30%.