BP to cut 7,000 jobs while ExxonMobil shows resilience

BP shares fall by 10% after report of worst annual loss of $5.2bn over crude oil collapse

 The oil industry giant reported  a $3.3 billion fourth-quarter loss as oil prices continue to fall globally. Photograph: Spencer Platt/Getty Images

The oil industry giant reported a $3.3 billion fourth-quarter loss as oil prices continue to fall globally. Photograph: Spencer Platt/Getty Images

 

Shares in BP fell as much as 10 per cent on Tuesday after the UK oil major reported its worst annual loss of $5.2 billion (€4.76 billion), hit by billions of dollars in writedowns and restructuring charges in the wake of the crude price collapse.

By contrast, ExxonMobil, the US oil company long rumoured as a possible bidder for BP, put in a resilient performance. It reported a smaller decline in earnings than its competitors, such as Chevron. Net income for the fourth quarter was $2.78 billion, down 58 per cent but above analysts’ expectations.

Job losses

On top of a $9.8 billion charge to settle US claims related to the Deepwater Horizon disaster, the price slump – which has been likened to the severe downturn of 1986 – sent BP to a record loss of $5.2 billion on a replacement cost basis, from an $8.1 billion profit in 2014.

BP’s shares tumbled as much as 10 per cent before recovering to 334.3 pence, down almost a quarter from levels a year ago. City analysts called BP’s 91 per cent slide in underlying fourth-quarter profits to $196 million – well short of $730 million expectations – “very poor” and “disappointing”. Including writedowns to its North Sea fields, where high costs and the market collapse have rendered much of the region unprofitable, the fourth- quarter loss was $2.2 billion, compared with $969 million in 2014.

Chief executive Bob Dudley voiced “surprise” at the market reaction and sought to allay fears over future dividend payouts, insisting these would be maintained. He said this year would be “turbulent” but oil prices would recover. “It’s lower for longer, not lower forever,” Mr Dudley said.

He held back from making deeper reductions to capital spending, announcing instead a further 3,000 job losses. “We are continuing to move rapidly to adapt and rebalance BP for the changing environment,” he said.

Strong performance

Like other oil companies, Exxon promised to cut capital spending, by 25 per cent to $23.2 billion for 2016, after a 19 per cent cut last year. But Rex Tillerson, chief executive, said the “scale and diversity of our cash flows, along with our financial strength, provide us with the confidence to invest through the cycle”.

Its planned capital spending for this year is lower than Chevron’s planned $26.6 billion, even though Exxon’s market capitalisation of $318 billion is almost twice Chevron’s $161 billion. – Copyright The Financial Times Limited 2016