BP (NYSE: BP) stock price soared sharply despite halving dividends and posting a record quarterly loss of $16.8bn compared to a profit of $1.8bn in the past year period. The oil company has also missed analysts’ expectations both on revenue and earnings.
Its second-quarter revenue of $31.19bn plunged 57% from the past year period and missed analysts’ consensus by $7.5bn.
“These headline results have been driven by another very challenging quarter, but also by the deliberate steps we have taken as we continue to reimagine energy and reinvent BP. In particular, our reset of long-term price assumptions and the related impairment and exploration write-off charges had a major impact. Beneath these, however, our performance remained resilient, with good cash flow and – most importantly – safe and reliable operations,” – company’s CEO Bernard Looney said.
The company has slashed dividends for the first time since the Second World War. It currently offers a quarterly dividend of $0.315 per share compared to an earlier dividend of $0.63 per share.
BP said they will sustain dividends at current levels over the long-term, and plans to return money to investors through share buybacks once the oil market stabilizes. The company seeks to return 60% of surplus cash through share buybacks.
Its share price soared surprisingly despite the historic loss and a change in dividend strategy. BP stock price soared close to 7% in pre-market trading amid investor’s strategy of buying on the dip. The market investors applauded the oil giant’s strategy of preserving cash during the testing times.
The market analysts claim that the dividend cut is already priced into BP stock. Jefferies analyst Jason Gammel upgraded the stock to ‘buy’, saying that BP’s asset sale strategy has already generated enough cash for restructuring actions, with $36bn in cash and $18bn in undrawn facilities. The shares of the oil company plunged more than 40% this year.