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BP Cuts Dividend By 50% After Huge Losses Due To Pandemic

BP Cuts Dividend By 50% After Huge Losses Due To Pandemic
The novel coronavirus pandemic hit on the global demand for oil and its prices has forced British Petroleum (BP) to reduce its shareholder dividend by 50 per cent while announcing a quarterly loss of $6.7bn.
For pension funds and private investors, this cut in dividends is another blow as they have been faced with a string of companies slashing or halting payment of dividends.
The major reason for the huge loss as BP’s decision to write down the value of its assets after it cut its oil price forecasts.
The outlook for oil prices and demand was "challenging and uncertain", BP said. The impact of the pandemic on the global economy could be seen for a "sustained period", the company also warned. The global demand for oil could get reduced in the short term by up to nine million barrels per day compared to the demand last year, BP is expecting.
The company has already said it would cut s many as 10,000 jobs including about 2,000 jobs in its home market of the United Kingdom.
The pandemic has virtually shut down major economies resulting in plunging of oil prices. For the first time in history, the price of oil turned negative in April which meant that oil producers were being forced to pay buyers to take oil off their hands as there were fears that storage capacity could run out.
Compared to the loss in the three months to June, BP had posted a $2.8bn profit in the same period last a year ago. Compared to a dividend of 10.5 cents  a share distributed by the company in the first quarter, BP has said that it would be distributing dividend of 5.25 cents a share.
Its first quarterly dividend was slashed in April by BP rival Royal Dutch Shell citing similar reasons. That was the first ever slashing of dividends by the oil giant since the Second World War.
There has been a series of dividend cuts by companies that have directly impacted investors and retirement savers.
In addition to its first dividend cut since World War II by Shell, shareholder payments have suspended by Britain's banks. And now BP has halved its dividend which is a first slashing by the company in more than a decade.
For UK pension funds and the army of pensioner investors who rely on the payouts, these have been particularly hard blows.
Traditionally, the largest dividend payment among the big blue chip FTSE 100 giants is given out by BP. According to analysts, there can reduction in dividends by British companies by about two-fifths in 2020.
It wanted to "pivot" from being a conventional oil company to being an "integrated energy company", BP said and added that it expects to achieve "net zero" carbon emissions for the company by 2050. Production of oil and gas is expected by BP to fall by at least one million barrels of oil a day, or by about 40 per cent in capacity compared to 2019, over the next decade.
The company therefore has drawn up plans to make investments in renewable and bioenergy as well as in hydrogen and carbon capture and storage technology.
"This coming decade is critical for the world in the fight against climate change, and to drive the necessary change in global energy systems will require action from everyone," said Bernard Looney, who took over as BP chief executive in February.

Christopher J. Mitchell

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