British oil and gas firm BP has reported a full-year net loss for 2020, its first in a decade following a “brutal” year.
Energy giant BP posted a full-year underlying replacement cost loss of $5.7 billion in fiscal year 2020, compared to a net profit of $10 billion for the previous year. This is also worse than what analysts polled by Refinitiv expected, which is a full-year net loss of $4.8 billion.
For the fourth quarter, the company reported a net profit of $115 million, much lower than analyst expectations of $285.5 million.
According to BP, its full-year loss may be attributed to lower oil and gas prices, significant exploration write-offs, pressure on refining margins and depressed demand. It also warned that the ongoing Covid-19 pandemic would continue to affect its business.
BP chief executive officer (CEO) Bernard Looney said: “It is definitely a tough quarter at the end, I guess, of a really tough year for everyone. And our full-year results were hit hard by Covid.”
“We have had the worst recession, I guess, in the world since the ’40s. It was a brutal year, I think, for the oil business — negative prices, fuel demand down 14%, aviation down 50%, and of course we had adjustments to our planning prices which resulted in impairments and write-offs,” Looney added.
He called 2020 a “pivotal year” for the firm and the “toughest of my career.”
“The good news is that the business continued to perform really, really well and I’m incredibly grateful to our staff around the world for that. Strong safety, strong reliability, ahead of plan on taking out costs … and net debt down lower than $39 billion,” added the BP CEO.
On the other hand, the company’s net debt has decreased by $1.4 billion over the fourth quarter and $6.5 billion for the full year to reach $39 billion. Looney pointed out that this trend could lead the company to reach a net debt of $35 billion.
Oil demand peaked in 2019
In September, BP released a report indicating that oil demand may have peaked in 2019 and may never recover from the coronavirus pandemic.
The BP report, which examined the global market for oil, forecasts a decrease in oil demand over the next 30 years. The oil company presented three scenarios for energy demand, all of which point to the long-term decline in demand.
BP pointed out that the scale and pace of the decrease will depend on the increasing efficiency and electrification of road transportation.
In the first scenario, the company predicts the market to be “business-as-usual,” wherein government policies and social preferences will be the same as in the recent past.
As a result, oil demand will slightly pick up following the pandemic but will plateau by around 2025 before starting to decline after 2030.
In the two other scenarios laid out by BP, governments will take more aggressive measures to reduce carbon emissions and there will be significant shifts in societal behavior.
This will mean that oil demand will not be able to recover from the impact of the pandemic and it will also mean that oil demand peaked in 2019.
The new report contrasts with the firm’s 2019 one, in which BP expected growth in oil demand to continue into the 2030s.
The dramatic shift in forecasts demonstrates the large impact of the coronavirus pandemic on global energy markets. According to analysts, the crisis will boost the shift away from fossil fuels towards renewable forms of energy.