BP swings to annual worst loss in history after pandemic impact

BP has reported its biggest-ever annual loss as plunging oil prices and demand amid the pandemic sent it tumbling into the red by 18.1 billion US dollars (£13.2 billion).

The oil giant’s record replacement cost loss compares with profits of 3.5 billion US dollars (£2.6 billion) in 2019 and comes after last year’s oil price collapse forced it to make massive write-offs.

Shares in the FTSE 100 stalwart sank 3% as it warned global demand will remain under pressure throughout the first quarter due to coronavirus restrictions.

It is expecting a 20% drop in year-on-year fuel demand in the first three months of 2021, worsening from the 11% drop at the end of last year.

This overshadowed BP’s more optimistic outlook for 2021, with the group confirming oil prices have risen since the end of October, helped by the rollout of the coronavirus vaccine, with demand also expected to bounce back this year.

On an underlying level, the group sunk to a 5.7 billion US dollar (£4.2 billion) replacement cost loss – its first for a decade on that basis since the losses seen in the wake of the Deepwater Horizon explosion and oil spill in 2010.

They also compare with underlying replacement cost profits of 10 billion US dollars (£7.3 billion) in 2019 and come despite a bounce-back in the second half of the year as oil prices started to recover.

BP’s results for the final quarter of 2020 show it made underlying profits of 115 million US dollars (£84 million), having swung out of the red in the previous quarter, but the figures were worse than expected.

Chief executive Bernard Looney said: “2020 will forever be remembered for the pain and sadness caused by Covid-19. Lives were lost, livelihoods destroyed.

“Our sector was hit hard as well. Road and air travel are down, as are oil demand, prices and margins.”

He said 2020 was also a “pivotal year” for the company as it launched a net-zero goal and overhauled itself in a move that saw nearly 10,000 jobs go.

Mr Looney added: “We expect much better days ahead for all of us in 2021.”

The results showed the impact of 17.5 billion US dollars (£12.8 billion) in write-offs made in the summer after Brent crude oil prices plummeted on the back of a production war kicked off by Russia and Saudi Arabia and then the coronavirus crisis.

Brent crude had started the year on around 61 US dollars (£44) per barrel, but dropped to 55 (£40) before January was out, even briefly dipping below 19 US dollars (£13) in April.

Rival Royal Dutch Shell also wrote down many billions of pounds and will reveal the toll on its results on Thursday.

For BP it has now been a year since boss Mr Looney took over the top job, promising to steer the ship on a new course.

The company, which is more than 100 years old, plans to reduce its emissions to a level low enough where they can all be offset by 2050.

Richard Hunter, head of markets at interactive investor, said: “The company’s outlook in the immediate future is understandably cautious and somewhat out of its hands, with supply controlled by OPEC and demand currently depressed by the effects of the pandemic.”

“Even so, BP is working hard to grow while transforming and to streamline while venturing into new areas,” he added.