BP cuts dividend in half as it vows to reduce oil production by 40%

BP has cut its dividend in half in a bid to free up cash for its push to become an “integrated energy company”.

The company said yesterday the reset dividend of 5.25 cents (4.01p) per share was a “resilient” level, as it unveiled its new strategy, packed with mediumterm targets.

Within 10 years, BP will have cut its oil and gas production by 40%, or about 1 million barrels per day (bpd), and reduced emissions from its operations by about a third. BP produced around 2.6m bpd last year.

The London-headquartered company also said it would invest 10 times more in low-carbon technologies like hydrogen and carbon capture, taking it to £3.8 billion a year.

Over the same period, BP aims to have developed about 50 gigawatts of net renewable generating capacity, a 20-fold increase from 2019 levels.

Chief executive Bernard Looney said BP’s strategy was a “compelling and attractive long-term proposition for all investors”.

Mr Looney acknowledged the “impact” the reset dividend would have on investors, but insisted the decision was in the interests of stakeholders. The firm did commit to returning at least 60% of surplus cash as share buybacks.

The company made the announcement at the same time as publishing its first-half results, which showed huge pre-tax losses of £19.9bn ($26bn), against profits of £6bn in the corresponding period last year.

Revenues fell 36% to £69bn in the first six months of the year due to a slump in oil and gas prices, caused by oversupply and the Covid-19 lockdown.

Mr Looney said the pandemic continued to create a “volatile and challenging trading environment” and warned the outlook for commodity prices and product demand “remained uncertain”.

The dividend cut was not unexpected. Mr Looney’s predecessor Bob Dudley bowed out in February with a flurry by treating shareholders to a dividend of 10.5 cents in the fourth quarter, an yearon-year increase of 2.4%.

When the company delivered its first-quarter results in late April, BP maintained the dividend, despite recording pre-tax losses of £3.6bn for the three months.

A couple of days later, Shell cut its dividend for the first time since the Second World War in response to the slump in oil and gas prices.

BP subsequently revealed plans to make 10,000 of its employees redundant, representing a 15% cut to its global headcount.