BP recorded its highest quarterly earnings in more than a decade, benefiting from soaring prices for hydrocarbons and “exceptional” oil and gas trading revenues, 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 profit measure most closely tracked by analysts — rose to $6.2bn, more than double the $2.63bn it recorded a year earlier.
That far exceeded average analyst estimates of $4.49bn and was up from $4.07bn in the final three months of 2021.
BP’s soaring quarterly profits, after its 2021 were already the highest in eight years, are likely to provoke further calls from opposition politicians in the UK for higher taxes on oil and gas companies to help consumers facing surging energy costs.
Rishi Sunak, the chancellor, last week for the first time said he would consider a windfall tax on the industry if it failed to increase investment in new energy projects.
BP said on Tuesday that it intended to invest up to £18bn in the UK’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 in 2022.
“We’re back Britain,” chief executive Bernard Looney said. “It’s been our home for over 110 years.”
The energy major’s bumper profits came despite the decision in February to divest its 19.75 per cent stake in Russian oil producer Rosneft following Moscow’s invasion of Ukraine. The move resulted in a pre-tax charge of $24bn and a paper loss for the quarter of $20.4bn as the oil major had to stop reflecting a share of Rosneft profits in its accounts. In the final quarter of 2021 Rosneft had added $745mn to BP’s adjusted profits.
Buoyed by surging profits, BP maintained its dividend and committed to back $2.5bn of shares the second quarter of 2022 after buying in buybacks of $1.6bn in the first three months of the year.
“In a quarter dominated by the tragic events in Ukraine and volatility in energy markets, BP’s focus has been on supplying the reliable energy our customers need,” Looney said.
The decision to exit the Rosneft shareholding had not changed BP’s strategy or expectations for shareholder distributions, he added.
While the stake in Russia’s state-backed oil producer was once central to BP’s long-term strategy, even before the war some investors felt that the shareholding had become incompatible with BP’s plans. Looney has outlined one of the most ambitious 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.
As part of that plan to become a net zero emissions business by 2050, BP aims to sell $25bn in assets by 2025 to cut and pay for green debt investments. Divestment proceeds since January have totalled $1.18bn, compared to $2.27bn in the final three months of 2021, when annual divestment totalled $7.63bn.
Net debt declined for the seventh quarter in a row to $27.5bn, down from $30.6bn three months earlier, after falling from $38.9bn at the end of 2020.