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* BP halves dividend to 5.25 cents per share
* BP record loss of $6.7 bln after impairments
* BP to cut oil and gas output 40% by 2030
* Boosts 2030 low-carbon energy spending to $5 bln
(Updates shares, detail)
By Ron Bousso and Shadia Nasralla
LONDON, Aug 4 (Reuters) - BP cut its dividend for the
first time in a decade after a record $6.7 billion
second-quarter loss, when the coronavirus crisis hammered fuel
demand, and it sought to win over investors by speeding up its
reinvention as a lower carbon company.
Its shares closed 6.5% higher on Tuesday after BP unveiled
earlier than expected a plan to reduce its oil and gas output by
40% and boost investments in renewable energy, such as wind and
solar, over the next decade.
All major oil companies suffered in the second quarter as
lockdowns to contain the new coronavirus limited travel and oil
prices fell to their lowest in two decades.
Several, including Royal Dutch Shell and Norway's
Equinor, cut their dividend in response.
BP CEO Bernard Looney, who took the helm in February,
avoided a dividend cut in the first quarter despite worsening
market conditions and as rivals reduced their payouts.
But Tuesday's 50% cut by BP to 5.25 cents per share, which
was larger than the 40% forecast by analysts, became inevitable
given a large debt pile, the collapse in oil and gas demand and
growing expectations for a sluggish global economic recovery.
BP's net loss was in line with analysts' expectations and
was largely a result of the company's decision to wipe $6.5
billion off the value of oil and gas exploration assets after it
revised its price forecasts.
BP recorded total impairments of $17.4 billion, at the upper
end of its previous guidance.
"These headline results have been driven by another very
challenging quarter, but also by the deliberate steps we have
taken as we continue to re-imagine energy and reinvent BP,"
Looney said in a statement.
"In particular, our reset of long-term price assumptions and
the related impairment and exploration write-off charges had a
major impact."
The loss, based on BP's current accounting definition, is
the first recorded on Refinitiv Eikon data. Looney called it the
"toughest quarter in the industry's history".
GREEN SHOOTS?
As the investment climate turns away from carbon-intensive
fossil fuel, Looney had planned to unveil BP's new strategy in
September. Instead, the company announced details on
Tuesday.
It said it would increase its low-carbon spending ten-fold
by 2030 versus current levels to $5 billion a year out of a
total budget of around $15 billion and boost its renewable power
generation to 50 gigawatts.
Over the same timeframe, it plans to shrink its oil and gas
production by at least 1 million barrels of oil equivalent per
day compared with 2019.
Italy's Eni, which has also outlined an ambitious
energy transition plan, said earlier this year it will wind down
its oil and gas production starting 2025.[
To hone its portfolio, BP targets divestments of $25 billion
between 2020 and 2025, around $12 billion of which are already
lined up.
It will retain its 19.75% stake in Russia's Rosneft
, it said.
While oil and gas are dominant, Redburn's equity analyst
Stuart Joyner said the strategic shift was encouraging.
"There will be inevitable questions over profitability of
new low carbon investments," he said. "But BP is now firmly
leading the sector in terms of transitioning its business to a
lower carbon future."
DEBT AND DIVIDEND
BP, which paid out a total of $7.2 billion in dividends last
year, became the largest dividend payer on the London FTSE stock
exchange after Royal Dutch Shell cut its dividend for
the first time since the 1940 earlier this year.
BP last reduced its dividend in 2010, when it was suspended
for three quarters following the deadly Deepwater Horizon rig
explosion.
It holds $40.9 billion in net debt after raising $19 billion
in new debt in the second quarter, more than any of its
peers.
Its debt-to-equity ratio, known as gearing, at 33.1% exceeds
its own target and places it at risk of a downgrade by rating
agencies.
BP said it aimed to "reset a resilient dividend" of 5.25
cents per share per quarter and to return at least 60% of future
surplus cash as share buybacks.
BP's second-quarter underlying replacement cost loss, the
company's definition of net income, reached $6.7 billion,
roughly in line with forecasts.
That compared with profits of $2.8 billion a year earlier
and $791 million in the first quarter of 2020.
Excluding the impairment charges, the sharp drop in revenue
from BP's oil and gas production and the worst refining profit
margins in 15 years were offset by an "exceptionally strong
contribution" by trading operations.
Smiliarly, Shell and Total's results were
cushioned from the full force of the coronavirus-induced demand
collapse.
But U.S. rivals Exxon Mobil and Chevron,
which have much smaller trading desks, suffered huge losses in
the quarter.
BP said it expects global demand to recover in the third
quarter, "albeit still significantly below last year's levels."
(Reporting by Ron Bousso and Shadia Nasralla; editing by
Barbara Lewis)
