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BP Cuts Dividend in Half As It Charts New Course Away From the Traditional Oil and Gas Business

Allen Good, CFA Sector Strategist

Analyst Note

| Allen Good, CFA |

With its second-quarter earnings report, BP announced it would reduce its quarterly dividend payout by half and instituted a new shareholder remuneration policy as part of its broader transformation away from oil and gas over the next 10 years while it pursues it emissions reduction goals. With respect to earnings, BP announced an adjusted quarterly loss of $6.7 billion compared with earnings of $2.8 billion a year ago due to the coronavirus impact on commodity prices and margins. The adjusted earnings exclude an $11.8 billion impairment charge related to the revision of BP’s long-term pricing assumptions, which it announced in June. Considering that earlier announcement, BP’s strategic decision to move away from the oil and gas business and its relatively high debt levels, the move to reduce the dividend does not come as a surprise. In fact, the 50% reduction is likely less than what the market was expecting considering peer Shell’s earlier 67% dividend cut.

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Company Profile

Business Description

BP is an integrated oil and gas company that explores for, produces, and refines oil around the world. In 2019, it produced 2.3 million barrels of liquids and 9.5 billion cubic feet of natural gas per day, including volumes from its 20% ownership interest in Rosneft. At year-end 2018, reserves stood at 19.9 billion barrels of oil equivalent, 57% of which are liquids. The company operates refineries with a capacity of 1.9 million barrels of oil per day.

1 St James's Square
London, SW1Y 4PD, United Kingdom
T +44 2074964000
Sector Energy
Industry Oil & Gas Integrated
Most Recent Earnings Jun 30, 2020
Fiscal Year End Dec 31, 2020
Stock Type
Employees 70,042