LONDON — BP plc said Tuesday it intends to slash dividends since the worldwide oil firm prepares for decreasing sales of fossil fuels by fostering investment in other energy projects.
London-based BP said it will boost spending low-carbon technology, such as renewable energy projects, 10-fold to $5 billion annually during the next ten years. The business expects gas and oil production to fall by about 40% over precisely the same period.
To help fund the tactical change, BP said it will reduce costs to 5.25 cents a share from 10.5 cents from the first quarter.
BP announced the change since it reported that a second-quarter operating loss of $6.68 billion since the COVID-19 pandemic cuts oil costs and demand for electricity. The amount, which excludes one-time things and changes in the value of stocks, compares to an operating gain of $2.81 billion in precisely the same period this past year.
“These headline outcomes are driven by yet another very ambitious quarter, but also by the willful measures we’ve taken as we are still re-imagine electricity and reevaluate BP,” chief executive Bernard Looney explained. “Specifically, our reset of long-term cost assumptions and the associated handicap and mining write-off prices had a significant effect.”
The volatility reduction comes at a time of enormous change for BP. It had embarked on a restructuring strategy to make sure its long-term viability which includes 10,000 job cuts internationally.
Markets rose 7.5percent in early trading on the information.
“It might have been extraordinarily hard to justify paying such a large payout while cutting jobs and selling resources in the same moment,″ stated Michael Hewson, chief market analyst of CMC Markets. “The pain in restructuring the company has to be spread equally and it is great that direction has acknowledged that. ″
Such programs are pushed ahead from the COVID-19 pandemic. The energy market was hit hard by the outbreak because the business constraints, traveling and people’s life decrease the demand for petroleum, gasoline, and other fuels.
The supply of petroleum and gas was especially high once the outbreak started, making a perfect storm for your business.