The coronavirus has exposed the fragility of a number of the world’s biggest oil and gas companies. But also given them the chance to form investors swallow some unpleasant remedies.
Since the pandemic started, BP Plc and Royal Dutch Shell Plc have made drastic changes. To their businesses, from multibillion-dollar write-downs to big cuts to dividends and jobs.
They explained these moves as responses to the twin threats of the lockdown-induced oil slump and therefore the growing pressure to chop carbon emissions. Yet the choices say the maximum amount about the companies’ individual fragility. As they are doing the challenges faced by the broader industry.
The current crisis, consistent with some analysts and investors, has given BP and Shell the prospect to wash house by reducing onerous shareholder payouts or adjusting unrealistic price assumptions.
“The BP announcement ‘kitchen sinks’ it, in order that long-term investors can step in with much of the worst within the rearview mirror,” said Thomas Hayes, managing member of investment management firm Great Hill Capital LLC.
BP announced on Monday the most important writedown on the worth of its business since the Deepwater Horizon disaster a decade ago. That came every week after the corporate said it might cut 10,000 jobs.
His counterpart at Shell, Ben van Beurden. Blamed equivalent factors for his difficult decision to chop the company’s dividend for the primary time since the Second war. Several analysts and investors predicted BP will do an equivalent before the present crisis is over.
“There has got to be an opportunity that Mr. Looney is softening up BP shareholders for a dividend cut,” said Russ Mould, investment director at AJ Bell. “If investors really do invest the new carbon-neutral strategy then they’ll be relatively forgiving of a discount. Within the annual distribution, especially given the autumn in oil and gas prices seen this year.”