The dramatic slump in the price of oil was underlined on Tuesday when BP revealed that its underlying profits for 2015 were halved and that it was cutting its global workforce by another 3,000.
Last year, BP cut 4,000 upstream jobs
and announced another 4,000 would go elsewhere in the group. The latest announcement means 7,000 will lose their jobs across the board over the next two years in the downstream arm, including refining, marketing and distribution.
Bob Dudley, BP group chief executive, said, "We are continuing to move rapidly to adapt and rebalance BP for the changing environment."
The company said its annual underlying profits fell by 51 per cent last year to $5.9 billion compared to $12.1 billion in 2014.
Underlying profits in the fourth quarter dropped to $196 million compared to $2.2 billion in the same quarter the year before.
Overall, BP posted an annual loss of $5.2 billion – its largest for more than 20 years – after writing down the value of its global assets because of the drop in the worth of its oil and gas reserves.
Michael Hewson, chief market analyst at CMC Markets, commented, "Oil and gas companies have had a tough time in the last two years. This morning's results from BP have added to the gloom surrounding the sector.
"While the dividend has been maintained the question now is whether it will continue to be so given that energy prices still show no signs of finding a base. As it stands BP had already announced 4,000 job losses earlier this year, with 600 in the North Sea as well as further capital expenditure cuts in an attempt to ride out the storm, but there is a worry that with a dividend yield of 7.3 per cent and a dividend cover of 0.5 it could be susceptible to a cut in the coming months, particularly given how bad this morning's results are.
"Bob Dudley will be particularly keen to ensure that the dividend remains untouched having finally restored it in the wake of the Gulf of Mexico disaster, having made the company much leaner since taking over the reins.
"But with average oil prices still trading at multi-year lows so far this year, the question that now needs to be asked is how long can BP sustain the dividend at current levels, without an imminent pick up in oil prices – how many more jobs will BP need to cut from its already reduced 80,000 workforce in the coming months in order to sustain its payout against a backdrop of a possible ratings downgrade, and lower energy prices for longer?"
Last year, BP has sold off $10 billion of assets and slashed annual costs by $3.4 billion. This year, another $5 billion of assets are expected as the company attempts to reduce annual costs by up to $7 billion by 2017.
BP admitted that the future would be "challenging" although Mr Dudley maintained that the company was making good progress in managing and lowering costs and capital spending.
Last week, Chevron announced its first quarterly loss in more than 13 years while Shell, which reports its full-year results on Thursday, has warned in a trading statement that its underlying profits could be halved.
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