Oil giant BP has announced a 53% year-on-year drop in second-quarter profits. That's due to falling oil prices and weak refining margins. The average oil price for the company's sales in the quarter was just $53 a barrel, compared to $110 last year. Chief executive Tony Hayward reiterated his view that $60-$90 is a "sensible" price for oil, but given "little evidence of any growth in demand" oil prices look set to trade in the bottom of the range for now.
What the commentators said
The challenge for BP, as for all oil companies, said Lex in the FT, is to balance the books when oil prices are low, while spending on exploration in order to top up supplies and maintaining the dividend. The latter comprises an eighth of all FTSE 100 payouts expected this year.
BP is aiming to balance cash flow at $60. But despite hacking $2bn out of costs in the first half thus meeting its full-year cost-cutting target it's not there yet. In the third quarter money out exceeded money in by $1bn. Enter another $1bn of targeted cost savings.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Deflation in BP's supply chain amid the downturn should help there, said Nils Pratley in The Guardian. Suppliers of equipment are having to accept lower prices. Meanwhile, oil is well above BP's average price in the second quarter and the full benefits of axing 5,000 employees should kick in the second half. All in all, Hayward's plan to "make BP fit for action at $60 looks credible".
BP: 507p; 12m change -3%
-
What happens if you can’t pay your tax bill, and what is "Time to Pay"?Millions are due to file their tax return this Friday as the self-assessment deadline closes. Though the nightmare is not over until you pay the taxman what you owe - or face a penalty. But what happens if you can't afford to pay HMRC your tax bill, and what is "Time to Pay"?
-
What does Rachel Reeves’s plan for growth mean for UK investors?Rachel Reeves says she is going “further and faster” to kickstart the UK economy, but investors are unlikely to be persuaded
