By Sarah McFarlane 

LONDON -- BP PLC cut its dividend for the first time in a decade, in a reset that would enable it to pivot away from oil and gas and invest more in low carbon energy, marking the most dramatic transition plans yet from an oil major.

The British energy giant aims to increase its low carbon investments to $5 billion a year by 2030, from around $500 million, at the same time as seeing its oil and gas production fall by 40% from 2019 levels.

BP's decision Tuesday caps one of the worst quarters ever for the world's biggest oil companies, all of which reported losses and warned of more pain to come as the coronavirus pandemic continues to sap global demand for fossil fuels.

The company's decision to halve its dividend follows a similar move by Royal Dutch Shell PLC, which said in April it would reduce its dividend by two-thirds. The other major oil companies -- Exxon Mobil Corp., Chevron Corp. and Total SA -- retained their dividends but have taken on more debt.

The dividend cuts upend what has long been a fundamental bargain between major oil companies and their investors, centered on reliable and large payouts.

The poor results and dividend cuts come at a time when oil companies were already under pressure from investors to articulate a vision for their future. Demand for fossil fuels is expected to plateau or shrink in the coming years as the world transitions to lower-carbon energy. Companies, including BP and Shell, have questioned whether oil demand will fully recover to pre-pandemic levels, or whether coronavirus could accelerate the transition to greener energy.

BP reported a replacement cost loss -- a metric similar to the net income figure that U.S. oil companies report -- of $17.7 billion for the three months ended June 30, from a profit of $1.8 billion for the year-earlier period. It reduced its quarterly dividend to 5.25 cents a share from 10.5 cents. The last time BP cut its dividend was in 2010 after the Deepwater Horizon oil spill in the Gulf of Mexico.

BP said its new dividend policy entailed a fixed amount, and it will return at least 60% of surplus cash as share buybacks once the company's balance sheet has been strengthened.

Write to Sarah McFarlane at sarah.mcfarlane@wsj.com

 

(END) Dow Jones Newswires

August 04, 2020 03:38 ET (07:38 GMT)

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