BP investors expect a dividend bombshell

Investors are braced for BP to slash its dividend as the oil giant slumps to one of its biggest quarterly losses.

A dividend cut would take a heavy toll on pension pots as BP is one of the most held stocks because of its generous income stream. Picture: AFP

Investors are braced for BP to slash its dividend — possibly by as much as two-thirds — as the oil giant slumps to one of its biggest quarterly losses.

Bernard Looney, 49, who took the helm as chief executive in February, clung on to the £1.6bn ($2.9bn) quarterly dividend at the first-quarter results in April — just days before rival Shell took the axe to its payout for the first time since the Second World War.

The markets indicate that the Irishman is under intense pressure to cut the dividend as he races to preserve cash in the face of an oil price buffeted by the economic fallout from the coronavirus.

The price of oil briefly turned negative earlier this year on falling demand and trade tensions, while a barrel of Brent crude plunged to less than $US20 from as high as nearly $US70. Last week, Shell posted the largest quarterly loss in its history.

 

“Consensus, the futures market and our own discussions imply a cut [to the dividend] is widely expected among investors,” said analysts at UBS, whose investment bank acts as a broker for BP.

A dividend cut would take a heavy toll on pension pots as BP is one of the most held stocks because of its generous income stream. It is closely watched by legions of private investors.

Mr Looney has warned he will slash $US17.5bn ($24.5bn) from the value of BP’s oil and gas assets in what he sees as a long-term collapse in prices from the COVID-19 crisis. This will push BP to a loss when it reports on Monday, after it made $US800m the previous quarter and $US2.8bn a year earlier.

Mr Looney has already announced 10,000 jobs from its 70,000 global workforce will go by the end of the year.

Investors are also awaiting a three-day presentation next month when Mr Looney will outline his long-term strategy. Within a week of replacing former chief executive Bob Dudley, Mr Looney set out an ambitious pledge of net-zero greenhouse gas emissions by 2050, which included pumping cash into renewables.

Jason Gammel, an analyst at Jefferies, reckoned a 65 per cent cut to the dividend was already priced into the share price. He and his team have upgraded BP to buy.

THE SUNDAY TIMES