Shell and BP investors look to results after tough year for oil majors

Britain’s two biggest oil companies are set to update shareholders next week amid a low oil price and a race to reduce emissions.

Investors will be leafing through BP’s results on Tuesday, while Shell will present how its third quarter went two days later.

Shares in both have cratered during 2020, as oil prices fell to record lows at one point at the beginning of the pandemic.

At one point sellers were paying buyers as much as 37.63 dollars to take a barrel of West Texas Intermediate oil off their hands, amid fears that storage space would run out for the crude in April.

Brent crude, the standard that is more commonly used in Britain, never turned negative but dropped to below 19 dollars per barrel.

Months later, both Shell and BP wrote off billions of dollars worth of assets after reducing the book value of the oil they still have in the ground.

“The focus (for BP) is now on getting the most out of its remaining oil fields while investing in a low carbon future, and given the rather precarious state of the balance sheet, it’s a very tricky manoeuvre to pull off,” said Susannah Streeter, a senior investment and markets analyst at Hargreaves Lansdown.

Chief executive Bernard Looney set out his views on climate change as he took the reins in February, promising to make the company net zero by mid-century.

He fleshed out his ideas in August when the company presented its most recent set of financial results and cut its dividend for the first time in a decade.

The company will cut its oil and gas production by 40% before 2030, and invest five billion US dollars a year (£3.8 billion) in low-carbon projects as it tries to reposition from a dirty fuel company.

Shell was also forced to cut dividends, for the first time since the end of the Second World War, earlier this year.

“Royal Dutch Shell is another FTSE 100 company that has faced difficulties since the markets dropped in March,” said analysts at the Share Centre.

“The oil price may have recovered from its April low, but it’s still almost 40% below where it was a year ago, and Shell’s shares have dropped to levels not seen in 25 years.

“The economic impact of the Covid-19 pandemic came on top of a failure by the Saudis to agree an oil production cut with Russia.”

They added: “Investors will be hoping there is light at the end of the tunnel.”