BP earnings fall 66% as Covid-19 hits demand By Ramla Soni

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In the three months to March 31 underlying net income was $791m versus nearly $2.4bn in the same period in 2019

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UK energy company  reported a 66 per cent drop in first-quarter earnings and increased debt levels following collapse in oil demand and crude prices. It is further evidence of the coronavirus pandemic taking its toll on the company’s finances.

The company said consumption of refined products had fallen significantly in March, when governments globally took increased measures to curb the spread of the virus.

In the three months to March 31 underlying net income was $791m (£634bn, €727bn) versus nearly $2.4bn in the same period in 2019. Shares in the company fell nearly 3 per cent in early trading.

On Tuesday morning Brent crude slid 4.3 per cent to $19 per barrel, having dropped below $20 a barrel last week for the first time in almost two decades. BP was also hit by weaker earnings from its oil trading business as well as poorer performance from its stake in Russia’s Rosneft.

Cash flow slid to $1bn in the quarter versus $5.3bn last year.

The company said there remains an “exceptional level of uncertainty” regarding the short-term outlook for prices and demand for refined products. It expects oil demand to fall by 16 million barrels a day in the second quarter compared with pre-crisis levels.

While BP did not plan on making any redundancies for three months, “there will be job cuts globally, towards the end of this year”, it said. Plans to drive down costs and reorganise the business under the new chief executive are being prepared.

Gearing, which BP defines as net debt divided by the sum of net debt plus equity, rose to more than 36 per cent in the first quarter, one of the highest in the sector. The company said it will remain above its 20 to 30 per cent target range into 2021.

Meanwhile, BP’s production in the quarter reached just short of 2.6m barrels of oil equivalent a day.

BP has already announced it will cut capital spending to $12bn, from initial expectations for $15bn. The company is also deferring certain exploration and appraisal activities and aims to cut costs by $2.5bn by the end of next year compared with 2019 levels.

BP is the first oil super major to report earnings, with  and  due in the coming days.

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