Its downstream operations have however offset its upstream losses by $747 million. It has maintained its dividend of 10 cents per ordinary share.
With British Petroleum reporting a humongous 80% drop in its oil revenues for the first quarter of this year, it has announced that it would further curtail capital expenditures. Incidentally, during this time frame, oil prices had dropped to their 13 year lows.
The oil company is the first big company to report such a weak first quarter results and has lowered its budgetary allocation of capital expenditure from its previous target of $19 billion to a more modest $17 billion. It has further clarified that if oil prices were to continue to be weak, it would increase the pace of its cuts.
Keeping these cost reductions in view, the oil major has forecasted that it can balance its books if the price of oil were to sell in the range of $50-55 a barrel in 2017. It had previously pegged this breakeven point to $60 a barrel.
Despite the significant drop in revenue its shares in the London Stock Exchange opened 3% higher, thus becoming the second biggest gainer in the blue-chip FTSE 100 index.
Bob Dudley, its CEO expects crude oil prices to stage a significant recovery towards the end of this year, as more and more oil producers are set to halt work while the demand for oil has remained robust.
“Market fundamentals continue to suggest that the combination of robust demand and weak supply growth will move global oil markets closer into balance by the end of the year,” said Dudley.
Incidentally, Dudley suffered an embarrassment earlier this month, when shareholders rejected his $20 million pay package.
The oil sector is seeing the worst downturn in the last three decades, with BP having to reduce its capital spending three times in 2015, to $19 billion. In addition, it had to also downsize its workforce by 10%, which amounts to 80,000 jobs, so as to sharply lower its costs.
In the previous year, BP had reported its biggest annual loss due to a variety of events including costs related to settling the oil spill in the Gulf of Mexico in 2010, massive write-offs of capital expenditure, as well as lower oil prices.
The oil spill in the Gulf of Mexico cost it a whopping $56.4 billion. Additionally, it had to shell out an additional $917 million during this first quarter, outside of the settlement amount.
As per its first quarter results of this year, although its net income of $532 million beats analysts’ forecast of a loss of $140 million, it is insignificant compared to the comparative figure of $2.6 billion a year ago.
It has further disclosed that its 2017 cash costs will be $7 billion lower than its 2014 figure.
British Petroleum is the first oil major to disclose the financial impact of continuing low oil prices. Its peers, Statoil, Eni and Shell are all set to report their first quarter earnings later this week.
Its trading and refining unit, known as downstream, has once again come to its rescue by reporting a first quarter profit of $1.8 billion, thereby offsetting $747 million in oil and gas productions.
BP has continued to maintain a dividend at 10 cents per ordinary share.
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