BP Reports Loss, Cuts Dividend

BP Reports Loss, Cuts Dividend

over 3 years ago2 mins

Investors pushed up BP’s share price even after it announced a second-quarter loss and a reduced dividend on Tuesday, but they might’ve just been impressed with the oil company's greener new look 💚

What does this mean?

While BP had been expected to make a loss, the company actually ended up losing less than analysts had thought. And sure, it suffered from low oil prices and damaged demand, but that was partly offset by the success of its trading arm. That part of the business – which puts cheap oil into storage and sells it on for more further down the line – took full advantage of swings in the commodity’s price to turn a profit.

Source: Bloomberg
Source: Bloomberg

Even so, BP followed in rival Shell’s April footsteps by announcing a 50% cut to its dividend – its first in a decade ✂️ And while those payouts might be restored in due course, investors may be worried they won’t be as high as they were before. Still, once it’s reduced its debts, BP has promised it’ll return 60% of its spare cash to investors via share buybacks.

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Why should I care?

BP also gave more details about its green ambitions: it’s planning a 40% reduction in hydrocarbon production by 2030, as well as a ramp-up low-carbon energy investment. It’s even promised not to go looking for oil in any new countries 🌏 See, BP reckons the pandemic will accelerate the world’s transition to a lower-carbon economy – and it seems to want to benefit from that shift or else risk getting left behind.

Source: The Wall Street Journal
Source: The Wall Street Journal

Environmental, social, and governance (ESG) investors might worry that companies meeting their civic-minded criteria may offer lower returns than those that don’t. And while Finimizers have said that doesn’t necessarily matter to them, BP’s update arguably shows it doesn’t have to be one or the other. Fresh demand from ESG investors, then, could help push its price even higher.

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