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(Alliance News) - BP swung to a huge annual loss following a tumultuous year in which the global oil and gas industry faced severe challenges, the oil major reported Tuesday.
For 2020, BP swung to a replacement cost loss of USD18.10 billion from a RC profit of USD3.52 billion in 2019 on revenue of USD183.50 billion, down 35% from USD282.6 billion.
Replacement cost loss is defined as the replacement cost of inventories sold in the period. It is BP's preferred profit measure.
On an underlying basis, BP's RC loss was USD5.69 billion, in line with analysts expectations of a USD5.5 billion to USD5.7 billion loss.
BP's 2020 loss attributable to shareholders was a startling USD20.31 billion, swung from a USD4.03 billion profit in 2019.
More positively, for the fourth quarter to December 31, BP swung to a RC profit of USD825 million from a loss of USD644 million in the third quarter and a loss of USD4 million in the fourth quarter of 2019.
The oil major said its performance was driven by lower oil and gas prices, significant exploration write-offs, narrowed refining margins, and depressed demand.
BP declared a fourth quarter dividend of 5.25 US cents, in line with the second and third quarter payouts, but halved from 10.25 cents in the fourth quarter 2019. This brings the full-year payment to 31.50 cents, down 23% from 41.00 cents in 2019.
Looking ahead, BP said its future financial performance, including cash flows and net debt, will be heavily influenced by the extent and duration of the current market conditions brought about by the Covid-19 pandemic. The company said it is "difficult to predict when current supply and demand imbalances will be resolved and what the ultimate impact of Covid-19 will be".
Year-end net debt was USD39 billion, down by USD1.4 billion over the quarter and USD6.5 billion over the course of 2020.
BP said net debt is expected to increase in the first half of 2021 before reducing in the second half of the year supported by growing operating cash flow and divestment proceeds. BP continues to expect to reach its USD35 billion net debt target around fourth quarter 2021 and first quarter 2022. However, this assumes oil prices in the range of USD45 to USD50 a barrel.
Brent oil was trading at USD56.92 a barrel Tuesday morning, up from USD55.82 a barrel at the London close Monday.
"These results reflect a truly tough quarter, with a challenging price environment and COVID-19 related demand impacts. Nonetheless, we made strong progress in reducing net debt again, to USD39 billion in the quarter. We remain on track to meet our target of USD35 billion between the fourth quarter of 2021 and first quarter of 2022, which will trigger the start of share buybacks, subject to maintaining a strong investment grade credit rating," said Chief Financial Officer Murray Auchincloss.
BP shares were down 2.8% in early trade on Tuesday.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.4% at 6,492.46
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Hang Seng: up 1.2% at 29,250.29
Nikkei 225: closed up 1.0% at 28,362.17
DJIA: closed up 229.29 points, or 0.8%, at 30,211.91
S&P 500: closed up 1.6% at 3,773.86
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GBP: up at USD1.3680 (USD1.3666)
EUR: flat at USD1.2071 (USD1.2076)
Gold: down at USD1,850.74 per ounce (USD1,860.90)
Oil (Brent): up at USD56.94 a barrel (USD55.82)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Tuesday's Key Economic Events still to come
1100 CET EU gross domestic product
0855 EST US Johnson Redbook retail sales index
0945 EST US ISM-NY report on business
1000 EST US housing vacancies
1000 EST US IBD/TIPP economic optimism index
1600 EST US domestic auto industry sales
1630 EST US API weekly statistical bulletin
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A door-to-door testing blitz of 80,000 people in England is aiming to find "every single case" of the South Africa coronavirus variant in a bid to stop the spread of the more infectious strain. Eleven cases of the variant identified over the past week were in people who had no links to travel, prompting concerns the mutation may be spreading in communities. Mobile testing units and home testing kits will be deployed to areas where the variant has been discovered as the UK government looks to prevent it getting a foothold. Meanwhile, UK Prime Minister Boris Johnson is reported to have asked ministers to ramp up preparations for the reopening of schools. The Daily Telegraph said he is expected to announce further measures to help children catch up after almost a year of disruption.
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US President Joe Biden met Monday with a group of Republican senators who are pushing an alternative to his massive Covid-19 relief plan, but no agreement was reached. Biden, who campaigned on restoring bipartisanship in Washington, wants to spend USD1.9 trillion to revitalize the world's largest economy after the pandemic caused waves of layoffs, but Republicans in Congress have said they won't support such a large package. On Sunday, a group of 10 Republicans detailed a measure costing USD600 billion, and Biden responded with an invitation to the White House to discuss the idea. But no agreement was at hand following the meeting, which Republican Senator Susan Collins described as "frank and very useful", if not conclusive. The senators released a statement Monday night saying the meeting was a "very productive exchange of views" and that they would continue to talk with the Biden administration and other senators "in the coming days" to reach an agreement on a bipartisan relief package.
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BROKER RATING CHANGES
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JEFFERIES CUTS FRESNILLO PRICE TARGET TO 1,375 (1,450) PENCE - 'BUY'
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BERENBERG INITIATES RENTOKIL INITIAL WITH 'SELL' - TARGET 400 PENCE
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BERENBERG INITIATES BURBERRY WITH 'HOLD' - TARGET 1820 PENCE
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COMPANIES - FTSE 100
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UK electricity utility SSE said the damage caused by the coronavirus on full-year operating profit will be towards the middle of the GBP150 million to GBP250 million range originally estimated in the annual results in June. SSE said it still expects adjusted earnings per share will be in its previously guided 85 pence to 90p range. The company intends to recommend a full-year dividend of 80p per share plus RPI for financial 2021 and continues to target annual RPI increases to 2023 as set out in its five-year dividend plan. SSE said it continues to make good progress on its five-year, GBP7.5 billion investment and capital expenditure plan. Finance Director Gregor Alexander said: "With solid operational performance and strong strategic execution, SSE is well positioned as we move towards the end of our financial year. Our robust business model is mitigating the impact of coronavirus, our disposal programme is proceeding at pace, and at Dogger Bank we have shown yet again that we can develop opportunities and create value from world-class assets. With a number of uncertainties lifting and an increasingly supportive policy environment which further underpins our clear strategic focus on the transition to net zero, SSE is on a strong strategic footing for the rest of 2020/21 and beyond."
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DCC said its operating profit for the third quarter ended December 31 was strongly ahead of the prior year despite the disruption and uncertainty caused by the global pandemic. DCC said it recorded strong organic operating profit growth, whilst also benefiting from acquisitions completed in the prior year. "The outlook for all economies in which the group operates remains very uncertain, with restrictions generally now increasing again. However, DCC's diverse and resilient business model and the essential nature of the Group's products and services has seen it respond well to the challenges of the pandemic and trade robustly. Assuming normal weather conditions for the balance of the financial year, DCC expects that the year ending 31 March 2021 will be another year of development and good growth in operating profit, ahead of current market consensus expectations," the company said.
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COMPANIES - FTSE 250
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Both sides in the British Gas engineers' dispute will be quizzed by UK members of Parliament on Tuesday amid an escalation of industrial action in the row over pay and conditions. Members of the GMB union have staged 12 strikes this year and will walk out again on Friday for four days. The union is opposed to new contracts, which, it said, cut pay and increases the working week for engineers. British Gas - which is a part of Centrica - says it is trying to protect jobs.
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Polypipe said it has bought Nu-Heat, a Honiton, Devon-based supplier of sustainable underfloor heating solutions, air and ground source heat pumps for GBP27 million. The acquisition will help Polypipe grow in the area of low-carbon heating, it said. Nu-Heat recorded earnings before interest, tax, depreciation and amortisation of GBP3.1 million on GBP16.0 million in revenue in 2020.
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COMPANIES - MAIN MARKET AND AIM
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Metro Bank has bought a portfolio of unsecured consumer loans made via the RateSetter platform by peer-to-peer investors. Metro Bank will pay up to GBP384 million for the portfolio, which has an average gross yield of about 8%.
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Ryanair said it carried just 1.3 million passengers in January, down 88% from 10.8 million a year before. It flew just 15% of its normal January schedule with a 69% load factor.
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Tuesday's Shareholder Meetings
Blackrock Frontiers Investment Trust PLC - AGM
JPMorgan Indian Investment Trust PLC - AGM
Scottish Investment Trust PLC - AGM
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By Tom Waite; thomaslwaite@alliancenews.com
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