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BP profits down as pandemic hits oil industry

Profits fell by 96% in final quarter of 2020

BP slumped to an overall loss of $5.69bn in 2020 as the coronavirus pandemic took its toll on the energy market.

The company’s underlying replacement cost profit, a barometer for net profit/less, was at $0.1bn over the final quarter of the year. This compared to a $2.6bn profit for BP over the final three months of 2019. 

The company’s share price fell 2.7% to 259p in mid-morning trade on Tuesday.   

BP has said the results were caused by a fall in energy prices, significant exploration write-offs, reduced demand and weaker refining margins. 

The company wrote off assets valued at $6.5bn in anticipation of falling oil prices over the long-term, as well as confirming 10,000 staff would be let go across the world.  

The oil industry was one of the worst affected by the pandemic during 2020 with the price of crude oil falling as low as $20 per barrel after lockdowns cut demand. 

Bernard Looney, chief executive officer of BP, retained a sense of optimism over the company’s performance, while acknowledging the damaging impact of the pandemic on the oil industry. 

“Our sector was hit hard as well. Road and air travel are down, as are oil demand, prices and margins. It was also a pivotal year for the company. We launched a net zero ambition, set a new strategy to become an integrated energy company and created an offshore wind business in the US,” Looney said.

“We began reinventing bp – with nearly 10 thousand people leaving the company. We strengthened our finances – taking out costs and closing major divestments.”

Having cut their dividend in 2020, BP maintained their dividend of 5.25 cents per share in Q4. 

Analysts have mixed views on the results as Russ Mould, investment director at AJ Bell, highlighted the destruction to the oil market in the short-term but the progress in realigning their long-term strategy.

“There are two ways of looking at full year results from BP. On the one hand the pandemic’s hit to oil demand contributed to the kind of loss that the market just can’t ignore,” said Mould.

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