LONDON: British energy giant BP on Tuesday said it slumped into a US$4.4-billion net loss in the first quarter as the coronavirus pandemic crushed demand for oil, triggering a price crash.
“Our industry has been hit by supply and demand shocks on a scale never seen before,” BP’s new chief executive Bernard Looney said in an earnings statement, having seen crude prices plunge from around US$70 per barrel at the start of the year to close to US$10 currently. He confirmed there would be job losses.
“The economic impact of the Covid-19 pandemic coupled with pre-existing supply and demand factors have resulted in an exceptionally challenged commodity environment,” BP said, having reported profit after tax of US$2.9 billion in the first quarter of 2019.
BP said it planned to reduce cash costs by US$2.5 billion by the end of 2021 relative to 2019.
“Some of these cost savings may have associated restructuring charges,” the company added.
Looney later told the Financial Times that “there will be job cuts globally towards the end of this year”.
It expects also to produce less oil in the second quarter, with companies unable to store the excess crude.
BP’s first-quarter output dropped 2.8% to 3.7 million barrels per day.
“BP’s warning about the second quarter being difficult should not be ignored… especially on a day when oil has fallen sharply yet again,” said Chris Beauchamp, chief market analyst at IG trading group.
BP’s share price rallied 1.2% to 317.7 pence in midday deals on the rising London stock market.
Crude futures plunged to record lows this month, with US prices sinking briefly into negative territory, also following a vicious price-war between major oil producers Saudi Arabia and Russia.
BP on Tuesday added that its underlying replacement cost profit – a widely-watched measure stripping out exceptional items and changes in the value of oil inventories – stood at US$800 million in the first quarter, compared with US$2.4 billion for the same period a year earlier.
“The result reflected lower prices, demand destruction in the downstream particularly in March, a lower estimated result from (Russian partner) Rosneft and a lower contribution from oil trading.”
BP on Monday said that crashing oil prices had prompted it to tweak the terms of a gigantic deal to sell off its Alaska operations.
Hilcorp Alaska in August agreed to purchase the assets, including operations in the mammoth Prudhoe Bay oilfield, for US$5.6 billion in a move that sees BP exit the US state after a 60-year presence.
The overall price tag remains the same but the structuring and phasing of payments has been modified.
The first quarter meanwhile saw the departure of long-time chief executive Bob Dudley, with the American leaving after a decade at the helm.
Soon after starting, Irish national Looney set BP a target to achieve “net zero” carbon emissions by 2050.