Industry NewsBP plunges into losses but maintains fourth quarter dividend

PetroChina Co said last week it expects 2015 profit to fall at least 60 per cent. Chevron Corp. on Friday reported its first quarterly loss since 2002, while Royal Dutch Shell Plc said last month that fourth-quarter profit is likely to drop at least 42 per cent. The European oil major is scheduled to report full earnings on Thursday.

As a result of collapsing profits and prices, BP says it is cutting up to 4,000 jobs in its upstream business in 2016 and up to 3,000 in its downstream business – which processes and delivers energy – by the end of 2017.

Downstream refers to its refined oil products, such as fuel, lubricants and petrochemicals, for making products such as paint and plastic bottles.

The UK based supermajor announced the results Tuesday saying: “Despite strong operational performance and growing cost reductions, the lower underlying result was predominantly driven by the impact of steeply lower oil and gas prices”.

“We are continuing to move rapidly to adapt and rebalance BP for the changing environment”, said chief executive Bob Dudley.

Despite the annual losses, BP has announced a dividend of 10 cents (6.9 pence) per ordinary share.

The oil company reduced costs by $3.4 billion in 2015 and expects them to be a total $7 billion lower by 2017. The average price of benchmark Brent crude slumped 42 per cent in the fourth quarter from a year earlier to US$44.69 a barrel, the lowest since 2004. BP’s focus on cost discipline and increasing efficiency continues.

Hargreaves Lansdown head of equity research, Steve Clayton, said: “BP hasn’t blinked on its dividend, but it is playing chicken with the oil price”.

Organic capital expenditure for 2015 was US$18.7bn.

Finance chief Brian Gilvary said: “We will keep the capital frame under review as we move through 2016 and beyond”.

BP is expected to wrack up even more losses in future – but at a lower level – from the Deepwater Horizon accident that occurred in April 2010.

BP is also aiming to reduce its global oil production, or upstream, headcount by 4K-20K as it undergoes a $3.5B restructuring program.

BP expects production for this year to be “broadly flat” with 2015. This takes the cumulative pre-tax charge for the incident to $55.5 billion.