BP profit jolted by slump in oil price

BP has been hammered again by the slump in oil prices as it revealed a dramatic fall in profits and paved the way for deeper spending cuts and more job losses.

The price of oil has halved in the past year and Brent Crude is currently trading at around $47 a barrel – well below the $115 hit last summer.

BP has already outlined cost cutting, job losses and the scaling back of new projects.

But yesterday it promised to take further action to protect dividends for shareholders if the oil price remains below $60 a barrel for the next two years.

Profit in the third quarter sank 40pc to £1.18bn, from £1.98bn a year ago, as the falling oil price took its toll.

But the pledge to continue to safeguard the dividend and the fact it generated more profits than the £ 780m expected by analysts, cheered investors.

BP’s shares were the top riser on the FTSE 100 in the morning but finished the day down 4.4p to 380p.

Chief executive Bob Dudley said it is taking action to ‘rebalance’ in this ‘new price environment’.

He added: ‘We want to give investors confidence that we’re going to be able to maintain the dividend. We can do this at $60 a barrel.’

BP has already sold off around £33bn of assets since the deadly 2010 Gulf of Mexico spill and expects to sell another £3bn next year. It has reduced spending by around £2bn so far this year, and is targeting £3.9bn of cuts a year by 2017. Around 4,000 jobs will have been axed by the end of the year. The weak oil price added to BP’s woes which began with the 2010 fatal oil spill.

It confirmed the total bill for fines in the US is now nearly £36bn – representing the largest corporate settlement of its kind in US history.

BP historically was one of the best paying stocks in the Footsie but lost this title following the 2010 disaster.

Following the crisis BP stopped paying its quarterly dividend for nearly a year and when it did reinstate it, it was just half the previous level.

Since 2011 it has gradually increased pay-outs and yesterday it announced a quarterly dividend of 10c (6.5p) a share, expected to be paid on December 18.

Russ Mould, investment director at stockbroker AJ Bell, said: ‘BP is now preparing for a long-term low price environment but investors will be heartened by its commitment to pay dividends in 2016.’

BP’s dividend represented £1 of every £6 of dividends paid in 2009, before the oil spill, according to AJ Bell.

The firm will now become the third biggest individual dividend payer in the FTSE 100 by next year – behind Shell and HSBC – and is expected to pay £ 4.5bn. This equates to roughly £1 in every £16 of dividends.

BP said its drastic cost cutting has put it in good shape to deal with low oil prices for the foreseea- ble future. Dudley added: ‘I am confident that BP’s strong and well-balanced portfolio of businesses and projects gives us the ability to grow value into the future. All of this underpins our strong priority of sustaining our dividend.

‘Now finally, BP can be more of a normal oil company and do what oil and gas companies do and I’m very excited about that.’

Fellow oil giant Royal Dutch Shell (down 28.5p to 1721.5p) and BG Group (down 22.5p to 1028p) – the oil firm Shell is in the process of buying in a £55bn deal – are both expected to this week reveal dramatic falls in profit as they also cut back on exploration and costs.

BG and Italy’s Eni are also reported to be facing a £1bn fine from Kazakhstan authorities for failing to meet certain contractual obligations on a gas project.