Page 9 - Euroil Week 17 2020

EurOil PERFORMANCE EurOil
BP swings to loss in Q1
UK
All the UK’s key segments were hit hard.
BP posted a loss attributable to shareholders of $4.37bn in the three months ending March 31, down from a $2.93bn profit in the same period last year. The UK firm blamed the reversal, unsurprisingly, on the oil price collapse, demand destruction caused by the coronavirus (COVID- 19) pandemic, and also foreign exchange losses.
Most of the loss derived from a $3.74bn loss on inventories owing to falling prices towards the end of the period. But BP also booked a replace- ment cost (RC) loss of $638mn, versus a $2.1bn profit a year earlier. Underlying RC profit was at $791mn, almost three times lower than the first quarter of 2019.
Excluding Gulf of Mexico oil spill payments, operating cash flow shrank to $1.2bn from $5.9bn a year earlier, while net debt crept up to $51.4bn at the end of March, up $6bn from the end of December.
“We are dealing with an exceptionally chal- lenging environment and the unprecedented effects of demand destruction and price impacts that can be seen in these results are expected to continue through the second quarter,” BP CFO Brian Gilvary said. “Despite this, our underlying businesses performed well in the first quarter, although our headline results were impacted by foreign exchange as well as price effects at the quarter end.”
Gilvary said the group had a “clear plan” for strengthening its business by building liquidity, shoring up its balance sheet and cutting spend- ing so that BP’s cash balance point falls below $35 per barrel next year.
BP has taken a series of steps to boost cash flow. It has cut its capex plan for this year by 25% to $12bn, and is targeting a $2.5bn reduction in operational costs by the end of 2021, relative to 2019. It also says it is on track to complete its $15bn divestment programme by the middle of next year.
This week the company reaffirmed its com- mitment to selling its Alaskan business to Hil- corp. The deal’s terms have been revised, but the sale’s $5.6bn price tag remains the same.
All BP’s main segments were hit hard by the crisis in the first quarter. Upstream underlying RC profits were down to $1.87bn, from $2.93bn a year before, while downstream income fell to $921mn from $1.73bn.
The company also posted a $17mn underly- ing RC loss linked to its 19.75% stake in Russia’s largest oil company, Rosneft. Several of Russia’s leading producers are anticipated to incur losses in the first quarter, because of the impact of ruble devaluation on their foreign-denominated debts.
Excluding contributions from Rosneft, BP’s production was down 2.9% year on year at 2.58mn barrels of oil equivalent per day (boepd). The company warned of a further decline in the second quarter, flagging up OPEC+’s deal as a source of uncertainty. BP operates in several countries that plan to impose production cuts next month under the agreement. Azerbaijan has reportedly asked the BP-led Azeri-Chi- rag-Gunashli (ACG) oil project to cut output by 80,000 bpd.
As NewsBase reported on April 1, many lead- ing oil companies that have announced plans to make their operations carbon neutral within the next few decades are likely to shelve them until markets stabilise. However, in spite of its cuts, BP still intends to spend $500mn in 2020 on low-carbon activities.
“We are determined to perform with pur- pose, and remain committed to delivering our net zero ambition,” CEO Bernard Looney said in a statement.
Italian major Eni also reported a first-quarter loss last week of €2.93bn ($3.15bn), caused by inventory losses, impairments and other one-off charges. ™
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