LONDON: BP’s first-quarter profit tumbled by two thirds and its debt climbed to its highest in at least five years as the coronavirus crisis hammered oil demand, but the energy major kept its dividend despite warning of exceptional uncertainty.
London-based BP said that it expected significantly lower refining margins in the second quarter when global restrictions on movement to halt the spread of the virus reached their peak, throttling consumption of gasoline, diesel and jet fuel.
“I can see many reasons why this recovery will take longer and therefore I think we’re in this for quite some time,” CEO Bernard Looney said.
The company said that oil and gas production faced “significant uncertainties” linked to tumbling oil demand and plunging prices, as well as due to a deal between OPEC, Russia and other producers to cut global supplies of crude by about 10 percent.
BP reported an underlying replacement cost profit, its definition of net income, of $800 million, beating the $710 million forecast by analysts in a company-provided poll. The company reported $2.4 billion profit a year earlier.
But BP, whose net debt climbed to its highest since at least 2015, kept its dividend of 10.5 cents per share and said it had repurchased shares worth $776 million in the quarter.
Stuart Joyner, equities analyst at Redburn, said that BP’s “large rise in net debt overshadows (its) underlying earnings beat.”
“While the quarterly dividend was maintained at 10.5 cents, serious questions remain over its affordability,” he added.
Including inventory charges of $3.7 billion for oil it holds, the company cited a loss of $4.4 billion.

BP has so far resisted cutting its dividend after raising it in February, even though some investors have said top oil and gas companies should consider reducing shareholder payouts.
Norway’s Equinor became the first big oil firm to cut its dividend, reducing its first-quarter payout by two thirds and suspending a $5 billion share buyback.
BP, like its peers, responded to the 65 percent drop in oil prices in the first quarter by sharply reducing spending. The company slashed its 2020 budget by 25 percent to around $12 billion and reduced output at its US shale operations.
Looney said that BP aimed to reduce costs so it could generate profits and pay dividends at an oil price of $35 a barrel in 2021, down from a breakeven $56 a barrel in 2019. He said spending could be cut further next year.
Brent crude has slumped to its lowest in two decades and was trading around $19 on Tuesday.
“The key question at this point is how far BP is willing to push the balance sheet in order to protect its dividend,” RBC wrote in a note, adding that it could end up spending the rest of 2020 and 2021 trying to pay down debt to reduce its gearing.