BP cuts jobs but protects shareholders as oil slump continues

BP's profits have been dragged down by the market price of oil Credit: PA

Headline numbers can be deceptive.

The jaw-dropping loss BP has just reported has more to do with the Deepwater Horizon than the collapse in the oil price, but 2015 was the year the company put the disaster in the Gulf of Mexico behind it, financially at least.

The human cost of the blowout was terrible - 11 people lost their lives - the clean-up and compensation has cost the company $55.5 billion - $10 billion of which was realised in these results.

Leaving Deepwater to one side, annual profits at BP have halved to $5.9 billion, dragged down by the market price of oil and gas.

BP is not in any obvious distress - it's managed to protect the dividend - but it's making some distressing decisions.

As income from oil and gas falls so BP is writing down the value of its assets upstream and cutting costs.

The investment budget has been trimmed again - 4,000 job losses have already been announced this year, another 3,000 have been announced today, onshore this time.

Financially at least, BP can put BP could put the Deepwater Horizon disaster behind it Credit: Reuters

It's unclear how many of those will affect the UK where the company employs 15,000 people.

The North Sea is an expensive place to drill for oil, operating there was challenging a year ago when the average price for oil was $77 a barrel, at $33 today it looks unsustainable in its current form.

A serious adjustment is underway and it has some way to run.

"It will take a long time for the tide to go out" warned BP's chief executive in an interview with ITV News two weeks ago.

"We won't see $100 a barrel again for a very long time".

Average price per barrel of oil a year ago
Average price per barrel of oil today

As producing oil and gas becomes unprofitable (BP's upstream operation made a loss in the last three months of last year), downstream is picking up some of the slack.

BP's refineries and service stations made a record profit last year, although consumer groups complain bitterly that the full benefits of the low oil price aren't being passed on to motorists.

When the price of oil falls, the price of almost everything falls so an oil glut is unalloyed good news for anyone who doesn't work in industry, which is most of us.

Anyone with a workplace pension will also be pleased to see BP returning $6.7 billion to shareholders.

They are being protected from the brutal cuts ... for now at least.