LONDON, UNITED KINGDOM – BP said Tuesday that underlying third-quarter profit more than doubled on high commodity prices after Russia’s assault on Ukraine, and revealed a major hit from Britain’s sector-wide windfall tax.
Replacement cost profit, excluding fluctuations in the value of crude oil inventories, soared to $8.2 billion in the three months to September, the British energy major announced in a statement.
That compared with $3.3 billion a year earlier and outstripped market expectations of $6.1 billion.
London-listed BP, flush with cash, also revealed a $2.5-billion share buyback.
Yet profits were weaker than the second quarter due to a dip in oil prices.
Nevertheless, energy markets remain elevated due to key producer Russia’s war on Ukraine, which has sent UK household fuel bills rocketing – but helped generate massive profits across the industry.
Energy prices also leapt after nations lifted Covid pandemic lockdowns, spurring demand.
Windfall tax
Runaway profits have heightened calls for Britain to massively enlarge its windfall tax to help cushion the impact of a cost-of-living crisis that has been largely sparked by sky-high electricity and gas bills.
Tuesday’s bumper earnings – after vast profits at Chevron, Shell and TotalEnergies – will not diminish those calls, according to analysts.
BP added that it will pay about $2.5 billion this year under the levy.
“This isn’t going to ease calls for windfall taxes at a time when governments are facing fiscal black holes requiring difficult decisions on taxation and spending,” said Oanda analyst Craig Erlam.
“Finding the right balance between taxing ‘excess profits’ as a result of the war in Ukraine without deterring investment won’t be easy.”
New British prime minister Rishi Sunak unveiled the windfall tax on the profits of UK energy companies earlier this year when he was finance minister in Boris Johnson’s government.
Yet Sunak has so far resisted calls to increase the tax, which is deemed far too small by green campaigners.
“With the economy sinking, energy bills soaring and the climate crisis deepening, Rishi Sunak must surely act on the excessive profits that fossil fuel firms like BP are raking in,” said Sana Yusuf at Friends of the Earth.
Energy transition
BP is meanwhile seeking to pivot towards cleaner energy and away from fossil fuels, sparking deep skepticism from environmental groups who accuse it of greenwashing.
“This quarter’s results reflect us continuing to perform while transforming,” said Chief Executive Bernard Looney.
“We are providing the oil and gas the world needs today – while at the same time investing to accelerate the energy transition.”
BP agreed earlier this month to buy US renewable gas producer Archaea for $4.1 billion to help it reach net zero carbon emissions by 2050.
The group added Tuesday that its bottom line was hit by large accounting charges in the third quarter.
Net losses stood at $2.2 billion, down from $2.5 billion last time around.