Apr 28, 2020 - Energy & Environment
Coronavirus-driven "demand destruction" hammers BP's profits
- Ben Geman, author of Axios Generate
A New Zealand BP petrol station showing the decline in prices on April 11. Photo: Hagen Hopkins/Getty Images
Oil-and-gas giant BP reported an extremely steep decline in quarterly profits on Tuesday in a stark sign of how the collapse in demand and prices is affecting the world's biggest producers.
Driving the news: The London-based multinational posted a quarterly profit of roughly $800 million, a two-thirds drop from $2.4 billion in the same period last year.
- The results reflect lower prices, and "demand destruction" in March, among other forces. "The environment is brutal," CEO Bernard Looney told the Financial Times.
Why it matters: The report provides fresh detail into how the sector is planning to navigate a tough new landscape.
- "I think we’re in this for quite some time," Looney told Reuters. The company reported an increase in debt.
- BP, which has already announced a deep spending cut, said it's taking other steps to shore up its finances, including a new $10 billion credit facility.
- The company said it's planning for a breakeven point below $35-per-barrel (Brent) in 2021.
What's next: More tough reports. Shell posts its results on Thursday, followed by ExxonMobil and Chevron on Friday.
- And looking ahead, the second quarter is likely to be even tougher. The International Energy Agency sees far greater demand loss during this period, with the trough coming in April and only slight recovery in May.
- BP expects its production to fall next quarter, and demand for refined fuels will be "significantly lower in BP’s key European and North America businesses."