Shares in oil major BP (BP.) gushed 7.2% higher to 301.2p as it announced a dividend cut as expected but saw second quarter losses no worse than forecast and enjoyed a strong performance from its trading division.

The company revealed $9.2bn of impairments pinned partly on falling crude prices. It declared a dividend of 5.25 cents per share for the quarter, down 50% from the previous quarter and said the dividend reset would remain fixed at this level.

Thanks to the write-downs net losses for the three months through June amounted to $16.85 billion, compared to losses of $4.37 billion in the first quarter.

Underlying replacement cost losses were $6.7 billion, compared with a profit of $2.8 billion a year ago, while revenue fell to $31 billion from $74 billion.

The bottom line losses included $9.2 billion in post-tax non-cash impairments across the group largely arising from lower oil-price assumptions and exploration write-offs. In the second quarter, production fell 3.5% to 3.66 billion barrels of oil equivalent per day.

LESS AGGRESSIVE DIVIDEND CUT THAN SHELL

AJ Bell investment director Russ Mould said: ‘It is worth noting that the 50% reduction in the payout is a less aggressive move than that seen at peer Royal Dutch Shell in slashing its own dividend by two thirds earlier this year.

‘Which of these was the right course of action in the long run remains to be seen, given the short-term pressures and long-term challenges facing big oil companies amid volatile oil prices and a transition away from polluting fossil fuels.

‘The loss BP announced this morning, linked to the write-down of the valuation of its assets, was no worse than analysts had expected, likely prompting a measure of relief.

‘And the benefit of being involved in almost every aspect of the oil market was revealed by a strong showing from its trading division as it benefited from all the volatility.’

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Issue Date: 04 Aug 2020