British Petroleum’s first-quarter net profit slumps 67% on low oil prices

British Petroleum (LON: BP) announced its net profit to have significantly plunged in the first quarter on Tuesday. The company cited low oil prices attributed to the Coronavirus and shrinking storage capacity for downbeat results.

The London-headquartered oil and gas company recorded its underlying replacement cost profit at £642 million in Q1. The measure is a reliable proxy for net profit. In the comparable quarter last year, BP reported its net profit at £1.92 billion that translates to a 67% decline (year over year) in the recent quarter.

Analysts’ estimate for Q1 underlying replacement cost profit

According to Refinitiv, analysts had forecast £792 million for the British oil giant’s Q1 underlying replacement cost profit. The chief executive officer, Bernard Looney of British Petroleum was reported commenting on Tuesday:

“A good quarter but, undoubtedly, a very brutal environment.”

The Coronavirus outbreak combined with diminishing storage capacity brought crude demand to a halt that recently pushed U.S West Texas Intermediate (WTI) futures below $0 for the 1^st time in history. At the start of 2020, WTI futures were reported above $60 a barrel. Commenting on demand, Looney further stated:

“The real situation that we have here is a fundamental situation of supply and demand. Demand in the second quarter, we think, will be down around 16 million barrels per day worldwide this year. And that’s about five times the previous demand destruction which we saw in the global financial crisis in 2008 to 2009.”

The oil major said it closed the first quarter with £41.22 billion in debt that marks a £4.81 billion increase as compared to the year-ago figure. In the first 3 months of 2020, BP’s debt-to-capital ratio surged 36%.

British Petroleum announces quarterly dividend

In its announcement on Tuesday, British Petroleum also declared its quarterly dividend of 8.4 pence per share. As per the CEO:

“The board of BP reviewed the dividend in the first quarter as usual and reviewed it in full and the decision was made to pay that dividend based on the underlying performance of the business in the first quarter and based on the actions we are taking.”

Shares of BP were reported 1.5% down in early trading on Tuesday. At 309 GBX per share, the company is currently around 35% down year to date in the stock market.

At the time of writing, British Petroleum is valued at £50.13 billion and a price to earnings ratio of 19.36.