Selasa, 03 Mei 2022

BP's bumper earnings stoke new calls for windfall tax - Financial Times

BP recorded its highest quarterly earnings in more than a decade, prompting renewed calls for higher taxes on oil and gas companies to offset soaring energy costs for consumers.

The UK-listed oil major’s underlying profit on a replacement cost basis, the measure most closely tracked by analysts, rose to $6.2bn in the first three months of the year, the highest since 2008 and more than double the $2.63bn recorded a year earlier.

The bumper profits, from soaring prices for hydrocarbons and “exceptional” oil and gas trading revenues even as BP wrote down the value of its business in Russia to zero, came on the back of the company’s highest full-year earnings in eight years.

Sir Keir Starmer, leader of the UK opposition Labour party, said BP’s earnings reinforced the case for a windfall tax on oil and gas profits from the UK North Sea, as Ed Miliband, Labour’s shadow climate change and net zero secretary, criticised the government for “refusing to act”.

BP chief executive Bernard Looney told the Financial Times he understood that many households were “really, really struggling” and that BP’s role was to return cash to shareholders including millions of UK pensioners, pay its taxes and invest in the UK energy system.

A spokesperson for Prime Minister Boris Johnson said that while a windfall tax was not being ruled out, it might deter companies from investing in the North Sea and put jobs at risk. “Each [energy] company will have to justify its approach,” the person said. “It’s about getting the right balance.” 

BP said it intended to invest up to £18bn in Britain’s energy system by the end of 2030 and expected to pay up to £1bn in taxes on its North Sea oil and gas profits this year. BP declined to disclose what percentage of the $6.2bn in quarterly profits was generated in the UK.

Looney said the redirection of global energy flows following Russia’s invasion of Ukraine had resulted in “the most volatile period in probably energy markets history”, adding that the volatility underlined the need for integrated energy companies such as BP.

“Our first job is to make sure that we connect the supplier of products to the demand for products and in this quarter that role has never been needed more by the world,” he said.

BP’s quarterly profits far exceeded average analyst estimates of $4.49bn and was up from $4.07bn in the final three months of 2021. Its shares were up slightly more than 2 per cent in late-morning trading on Tuesday.

The performance came despite the company’s decision in February to divest its 19.75 per cent stake in Russian oil producer Rosneft following the invasion of Ukraine, which resulted in a pre-tax charge of $24bn and a paper loss for the quarter of $20.4bn — the highest quarterly loss in BP’s history.

BP still holds the stake for which there are few potential buyers given the decision by most international energy companies to distance themselves from Russia. It declined to comment on how and when it expected to divest the shareholding.

The writedown weighed slightly on the oil major’s underlying earnings — in the final quarter of 2021 Rosneft added $745mn to BP’s adjusted profits — but was more than compensated for by the impact of high commodity prices and the performance of other divisions.

“It’s not just the trading business, it is right across the company, the business is running well,” Looney said, adding that BP’s convenience retail division had its best first quarter on record.

Looney added that the decision to withdraw from Russia had not altered BP’s strategy, financial framework or expectations for shareholder distributions.

The company maintained its dividend and expanded its buyback programme to reach $2.5bn in the second quarter of 2022 after completing buybacks of $1.6bn in the first three months of the year. Net debt declined for the seventh consecutive quarter to $27.5bn, down from $30.6bn three months earlier after falling from $38.9bn at the end of 2020.

While the stake in Russia’s state-backed oil producer was once at the heart of BP’s long-term strategy, even before the war some investors felt it had become increasingly incompatible with the group’s plans. Looney has outlined one of the most comprehensive corporate overhauls in the sector, pledging to cut oil and gas production by 40 per cent by 2030 while increasing spending on renewable power generation 20-fold.

“BP ex-Russia is a lower risk investment and the rest of the businesses are performing well,” said Oswald Clint, analyst at Bernstein. “Across the divisions it’s all about higher volumes, price capture, refining margins, and exceptional trading contribution.”

Additional reporting by Jim Pickard


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2022-05-03 10:55:17Z
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