BP posted its highest quarterly profit in more than a decade, benefiting from soaring hydrocarbon prices and ‘windfall’ revenues from oil and gas trading even as it wrote down the value of its business in Russia to almost zero.
The UK-listed oil major’s underlying profit on a replacement cost basis for the first three months of the year – the metric most followed by analysts – reached $6.2 billion, or more than double the $2.63 billion recorded a year earlier.
That far exceeded average analyst estimates of $4.49 billion and was up from $4.07 billion in the last three months of 2021. BP shares rose 3.3% on Tuesday morning.
BP’s soaring quarterly profits, following its highest annual profits in eight years, are expected to spark renewed calls from UK opposition politicians for higher taxes on oil and gas companies to to help consumers facing soaring energy costs.
Chancellor Rishi Sunak said last week for the first time that he would consider a windfall tax on industry if it fails to boost investment in new energy projects.
BP on Tuesday announced plans to invest up to £18billion in Britain’s energy system by the end of 2030 and pay up to £1billion in tax on its oil and gas profits in North Sea in 2022.
“We support Britain,” said chief executive Bernard Looney. “This has been our home for over 110 years. »
The energy major’s windfall profits come despite a February decision to sell its 19.75% stake in Russian oil producer Rosneft following Moscow’s invasion of Ukraine. The move resulted in a pretax charge of $24 billion and a paper loss for the quarter of $20.4 billion, as the oil major had to stop reflecting a share of Rosneft’s profits in its accounts. In the last quarter of 2021, Rosneft had added $745 million to BP’s adjusted profits.
Buoyed by rising profits, BP maintained its dividend and pledged to repurchase $2.5 billion of shares in the second quarter of 2022 after completing buybacks of $1.6 billion in the first three months of the year.
“In a quarter dominated by the tragic events in Ukraine and the volatility in the energy markets, BP focused on providing the reliable power our customers need,” Looney said.
The decision to divest Rosneft’s shareholding did not change BP’s strategy or expectations regarding distributions to shareholders, he added.
While the stake in the state-backed Russian oil producer was once central to BP’s long-term strategy, even before the war some investors felt it had become increasingly incompatible with plans for BP. Looney described one of the most ambitious corporate overhauls in the industry, pledging to cut oil and gas production by 40% by 2030, while increasing spending on oil production 20 times. renewable energy.
As part of this plan to become a net-zero emissions company by 2050, BP aims to sell $25 billion in assets by 2025 to reduce debt and pay for green investments. Divestment proceeds since January totaled $1.18 billion, compared to $2.27 billion in the last three months of 2021, when annual divestment was $7.63 billion.
Net debt fell for the seventh consecutive quarter to $27.5 billion, from $30.6 billion three months earlier, after falling $38.9 billion at the end of 2020.