What Next For BP Share Price After Q2 $6.7 Billion Loss?

BP announces a better than expected $6.7 billion loss, the share price jumps 7%

Energy 4

The focus when BP reported today was always going to be in the dividend. After rival Shell slashed their dividend by 2/3rds surely it was only going to be a matter of time until BP followed suit?

BP cuts its dividend for the first time in decade after plunging into a record loss as the coronavirus pandemic crushed energy demand. The dividend was slashed by 50% to 5.25 cents, down from 10.5 cents a share. The last time that BP slashed its dividend was after the Deepwater Horizon oil spill.

Ugly but could have been worse?
BP reported $6.7 billion loss in Q2, compared with profits of $2.8 billion in the same period a year earlier. Whilst this is a very grim number, investors had been bracing themselves for worse, with expectations of a$6.8 billion loss. Thanks to the better than forecast loss investors are managing to look beyond the larger than forecast dividend cut sending the share price has soared 7%.

In Q2 the average price of oil declined by more than half to $29.50 a barrel, down from $70 per barrel in early January. This slump forced BP to announce write offs to the tune of $17 billion whilst also slashing 10,000 jobs to shore up the balance sheet.  BP breaks even at $40 per barrel.

The future’s green
With the demand for oil expected to remain weak and long term price forecast of oil remaining depressed pressure is expected to remain on oil majores. BP committed to its drive towards net zero. Ahead of the strategy presentation next month CEO Bernard Looney said the firm aims to increase its annual low carbon investment 10 fold to around $5 billion per year.  BP will also cut emissions and invest heavily in renewables.  

Chart thoughts
BP had been trading around -50% YTD after the covid rebound stalled early on. Today’s 7% jump in BP’s share price has push it above its descending trendline, which had held since early June. A close above trendline resistance turned support at this key 300p level could see the share price attack resistance in the region of 310p – 315p the 50 & 100 daily moving average.
Should BP fail to close above 300p then we could see the stock continue its downward trend towards 270p and 222p the March low.


More from Equities

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.