C: Mike Mozart
Mike Mozart

Oil giant BP sent shock-waves through the industry this morning with what has been described as a “jaw-dropping” loss.

It is the first of the majors to post their results and the scale of the losses do not bode well for other companies in the queue. Shell will be the next to report results on Thursday.

BP reported an annual loss of $6.5 billion, and a fourth quarter loss of $2.2 billion, which is 90 per cent lower than a year ago. It is the oil giant’s worse financial results for 20 years. One City trader in London described the results as “very poor”.

Another, Ahmed Ben Salem, oil and gas analyst at Oddo & Cie in Paris told Bloomberg: “It’s very disappointing. We were expecting lower profit from upstream, but not a loss. The dividend payout is probably safe for this year, but if oil stays around $30 then they would have to cut capex further.”

The company is being hammered on two fronts – still paying liabilities on the disastrous Deepwater Horizon spill and the plummeting oil price. BP’s liabilities for the spill now stand at some $55 billion.

The company’s share price has also taken a battering. Pre-Deepwater, the shares were 650 pence. After today’s announcement, the share price fell another 7 per cent to below 340 pence this morning.

The embattled giant now plans to shed some 7,000 jobs over two years. Some four thousand jobs are due to go in exploration and production and three thousand in its downstream business.

BP Group chief executive Bob Dudley argued the oil company was doing everything in its power to cuts costs in the new low-oil price era.

“We are continuing to move rapidly to adapt and rebalance BP for the changing environment,” he said. “We’re making good progress in managing and lowering our costs and capital spending, while maintaining safe and reliable operations and continuing disciplined investment into the future of our portfolio.”

Dudley is now betting that the oil price will recover to $50-60 per barrel by the year end.

BP will be hoping beyond all hope that he is proved right.