BP slashes div­i­dend as it tran­si­tions to green fu­ture

Oil ma­jor slumps to record loss and deals heavy blow to in­vestors, but its plan for clean tech steals the show

The Daily Telegraph - Business - - Front Page - By Ed Clowes

BP HAS vowed to leave oil be­hind with a his­toric shift into green en­ergy af­ter cut­ting its div­i­dend in half and sink­ing to a record loss.

The North Sea be­he­moth set out an am­bi­tious plan to slash fos­sil fuel pro­duc­tion by 40pc over the next decade and in­crease its an­nual in­vest­ment in re­new­able and clean tech­nolo­gies to $5bn (£3.8bn) a year.

BP will also de­velop more than 50 gi­gawatts (GW) of wind and so­lar farms – equiv­a­lent to Bri­tain’s en­tire re­new­able ca­pac­ity at present.

Bosses were forced to cut div­i­dend pay­ments for the first time since the Deep­wa­ter Hori­zon dis­as­ter a decade ago as part of a bat­tle to save money. It will pay 5.25 US cents per share, down from 10.5 cents in the pre­vi­ous quar­ter.

Cut­ting the div­i­dend will ham­mer hun­dreds of thou­sands of small in­vestors who own the stock for an in­come and con­trol around 30pc of BP shares be­tween them.

The com­pany plunged $6.7bn into the red in the three months to June – its worst ever quar­terly loss – af­ter a steep cut to the es­ti­mated value of its oil and gas ex­plo­ration as­sets. How­ever, shares closed up 3.4pc as mar­kets wel­comed the push into re­new­ables.

Drilling firms around the world are strug­gling to cope with a col­lapse in the oil price af­ter the pan­demic brought nor­mal life to a crash­ing halt. Brent crude has dropped to $44 a bar­rel from al­most $70 at the start of the year, while the US bench­mark briefly went nega­tive in a his­toric plunge as the cri­sis took hold. BP has al­ready an­nounced it will lay off 10,000 staff to save money, and has long planned to fo­cus on re­new­able power in fu­ture as the golden age of oil comes to an end.

Bernard Looney, who took charge in Fe­bru­ary, said: “BP has been an in­ter­na­tional oil com­pany for over a cen­tury. Now we are piv­ot­ing to be­come an in­te­grated en­ergy com­pany. From a com­pany driven by the pro­duc­tion of re­sources to one fo­cused on de­liv­er­ing en­ergy so­lu­tions for cus­tomers.”

The de­tails build on a press con­fer­ence ear­lier this year when it pledged to reach net zero emis­sions by 2050. As part of this man­aged de­cline, BP will no longer ex­plore for oil in coun­tries where it is not al­ready prospect­ing. It also un­veiled a fi­nan­cial plan to sup­port what bosses said is a fun­da­men­tal shift to­wards low car­bon en­ergy.

While the 50pc div­i­dend cut was greater than the 30pc Bar­clays an­a­lysts were an­tic­i­pat­ing, they noted the new strat­egy was over­whelm­ingly pos­i­tive.

Cli­mate change ac­tivists wel­comed the plan. Green­peace said: “BP has wo­ken up to the im­me­di­ate need to cut car­bon emis­sions this decade … this is a nec­es­sary and en­cour­ag­ing start.”

But some share­hold­ers and an­a­lysts have ques­tioned whether BP can man­age the shift to clean tech­nolo­gies while re­main­ing highly prof­itable.

Ly­dia Rain­forth, of Bar­clays, said: “Prov­ing that it can de­liver prof­itable growth, rather than just set­ting an am­bi­tion for it, will be the next key step.”

The pan­demic has ac­cel­er­ated the process of change for all three of Europe’s su­per­ma­jor oil firms. BP, Shell, and Italy’s Eni have each an­nounced plans to slash car­bon emis­sions and grad­u­ally pre­pare their busi­nesses for a world with­out fos­sil fu­els.

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