The costs of BP’s (BP.) exit from Russia were laid bare in first quarter results which revealed a $20.4 billion hit but the company also reported its highest underlying quarterly profit in 10 years at $6.25 billion.
The market focused on this and news of a $2.5 billion share buyback as it marked BP shares 2.4% higher to 400.8p, taking year-to-date gains to more than 20%.
The big increase in profit, from $4.1 billion in the previous quarter, was well ahead of analysts’ forecasts of $4.5 billion and was supported by surging oil and gas prices linked to Russia’s invasion of Ukraine.
Net debt was reduced to $27.5 billion while the dividend was held steady at $5.46 per share. The extremely strong levels of profitability are adding to the debate over a possible windfall tax on the company’s profits.
Separate to today’s quarterly figures BP announced plans for £18 billion worth of investment to boost UK energy security over course of this decade.
BIG INVESTMENT IN UK UNVEILED
This is expected to include spending on areas like offshore wind, hydrogen, carbon capture and storage as well as electric vehicle charging infrastructure, retail outlets and North Sea oil and gas.
BP chief executive Bernard Looney arguing the company was ‘backing Britain’ and the company pointedly revealed it expected to pay £1 billion in tax on its North Sea oil and gas profit this year already.
Director at research house at Edison, Ian McLelland, said: ‘This announcement may further fuel calls for a windfall tax on oil company profits, and Italy’s recent decision to up its plans for a tax to 25% may prove an enticing blueprint for other governments. For now, the UK government looks resolute, though rumoured divisions within cabinet may lead to a policy change in future.
‘As BP revels in inflated oil and gas prices, the company is also investing in renewable projects. Alongside new North Sea oil projects, it plans to invest in offshore wind and hydrogen in the UK, as well as EV capabilities, with its recent partnership with VW delivering thousands of new charging points at its petrol stations, expanding BP’s network to over 8000 charging points by 2024.
‘The company is likely to continue to accelerate investment in transformational projects in order both to migrate to a cleaner integrated energy company as well as to counteract the growing pressures to levy windfall taxes.’
