BP has warned that the oil market continues to face a volatile future because of the coronavirus pandemic as it prepares to cut thousands of jobs from its global workforce within weeks.
The oil giant returned to a modest underlying profit of $86m (£66m) in the third quarter but warned on Tuesday that the effects of the Covid-19 outbreak had created a “challenging” environment for the company.
The underlying profit, which is the figure most keenly watched by the market, was better than the $120m loss predicted by equity analysts, but was a fraction of the $2.3bn reported for the same quarter last year, because of the collapse of global oil prices.
The price of Brent crude averaged $42 a barrel in the third quarter, up from an average of $30 over the previous quarter, when BP slumped to a $6.7bn underlying loss that included a string of writedowns on its exploration assets.
BP said the “ongoing impacts of the Covid-19 pandemic continue to create a volatile and challenging trading environment”, and added that the recovery remained uncertain.
The oil company delivered the warning less than a week after its share price plunged to lows not seen since 1994. It plans to cut thousands of jobs by the end of 2020.
BP is cutting 10,000 jobs from its global business at a cost of $1.4bn to weather the downturn and help shore up its finances as it shifts towards low-carbon energy. Investor jitters over the global industry, and BP’s bold climate targets, have caused the oil company’s share price to tumble to 26-year lows of 200p a share in recent weeks. It fell further, to 196.69p a share, following its latest quarterly results.
BP said it had reduced its headcount by about 2,800 people so far, in part through a voluntary redundancy programme. Thousands more will follow in the coming weeks with BP aiming to complete the majority of the cuts this year.
Bernard Looney, BP’s chief executive, assured investors that the company would keep its existing dividend policy in place after reducing it by half in August, the first cut since the Deepwater Horizon oil spill in 2010. He also promised that the oil giant’s move towards low-carbon energy would be based on projects which offer strong returns.
“Having set out our new strategy in detail, our priority is execution and, despite a challenging environment, we are doing just that – performing while transforming,” he said.
Looney said in May that the collapse in oil market prices triggered by the coronavirus meant he was “more convinced than ever” that BP’s low-carbon transition was necessary. The company took its first steps into the offshore wind market months later by taking a $1.1bn stake in two US offshore wind projects being developed by the Norwegian state oil company Equinor.
BP’s energy economists have said that demand for oil may never recover after the pandemic, which has taken a heavy toll on transport industries, and may be on the brink of an unprecedented decades-long decline.
The company slashed the value of its oil assets this year to reflect its view that oil price forecasts would be below expectations as a result of the pandemic. The write-offs led to a net loss of $16.8bn in the second quarter, but in the absence of further writedowns BP reported a fifth consecutive net loss of $500m for the last quarter.