BP says thousands of jobs will go as low oil price savages profits

FTSE giant sees no end to crude woes as profit in third quarter falls by 40 per cent

Job cuts are part of plans to deal with plunging demand for fuel caused by Covid-19 (Getty)

BP has warned of further job cuts as it revealed a 40 per cent dive in third-quarter profits and announced plans to slash costs to deal with the prolonged oil price slump.

Announcing the profit plunge to $1.8bn (£1.2bn), the BP chief executive Bob Dudley warned that the crude price was unlikely to exceed $60 a barrel for the next two years. Oil is trading around $47, compared with $90 a year ago and $115 a barrel last summer, as slowing demand from China and a surge in supply from the US has created a glut in supply.

The cost-cutting measures outlined include a large number of job losses. “We have been working to reset and rebalance activity in BP for about a year and a half now – and, as a result, there has been an impact on jobs,” said Mr Dudley “By the end of the year there will be about 4,000 fewer BP employees than at the start; this does not include contractor staff.”

A BP spokesman confirmed there would be a “further impact on headcount”, but did not give details. The company indicated that the US business would suffer the largest number of job cuts.

BP said capital expenditure for the year would come in at around $19bn – against its forecast of $24bn to $26bn a year ago.

Furthermore, the FTSE 100 group said expenditure would probably fall again next year, to between $17bn and $19bn, as it seeks to maintain its dividend in the face of a persistently lower oil price that dragged down profits at its “upstream” exploration and production division to $800m, from $3.9bn a year ago.

However, the downstream division performed strongly, with profits jumping from $1.5bn to $2.3bn as the falling cost of oil increased the group’s refining margin.

BP said “controllable costs” were $3bn lower during the first three quarters of 2015 than in the same period in the year before. It forecast that by 2017 they would be more than $6bn lower than in 2014.

The company will step up divestments to $3bn to $5bn next year before returning to a rate of $2bn to $3bn in 2017.

“Last year, we acted decisively to reset BP for a sustained period of lower oil prices, and the results are coming through well,” said Mr Dudley. “We are now in action to rebalance our financial framework in this new price environment,

“All of this underpins our strong priority of sustaining our dividend and then growing free cashflow and shareholder distributions over the long term,” he added.

BP’s announced a quarterly dividend of 10 cents a share.

The group’s stake in Russia’s Rosneft contributed $382m to its bottom line, compared with $110m a year earlier.

Mr Dudley said he was glad that BP had finally settled all claims relating to the Gulf of Mexico oil spill in 2010 – a disaster that has cost the group a total of $55bn, after it set aside a further $426m in the third quarter.

“For the first time in five years, we can begin to plan the company,” Mr Dudley explained.

“We need to pace our capital spending and we also have a strong balance sheet. We have lots of flexibility.”