BP has booked an $8.2 billion (£7.1bn) profit in its latest quarter as it pointed out it expects to pay $2.5bn (£2.2bn) in tax in the UK this year.
Of this, the energy giant said $800 million of this would be paid as part of a windfall tax which was imposed by the UK on oil and gas companies to help address the cost of living crisis.
Chancellor Jeremy Hunt is considering an expansion of the North Sea windfall tax – despite figures showing a near-700% increase in payments during the last year.
Meanwhile, the company affirmed it would hand over a similar amount as it paid the tax man to shareholders – it said announced a further $2.5 billion share buyback as part of its “commitment to shareholder distributions”.
BP boss Bernard Looney said the firm was focused on “helping solve the energy trilemma” by providing “secure, affordable and lower carbon energy”.
BP ‘focused on energy trilemma’
BP along with Shell has seen a slight decline in profits quarter on quarter – BP’s third quarter profit was slightly lower than Q2 when it hit a record $8.5bn in profits, due to weaker refining margins and a dip in oil and gas prices.
Nevertheless the firm’s “underlying replacement cost profit” was just $3.3bn in the same quarter in 2021, making this quarter’s profits almost three times higher.
Mr Looney said: “This quarter’s results reflect us continuing to perform while transforming.
“We remain focused on helping to solve the energy trilemma – secure, affordable and lower carbon energy.
“We are providing the oil and gas the world needs today – while at the same time – investing to accelerate the energy transition.”
Meanwhile, he pointed to the group’s $3.3bn acquisition of a US-based “renewable” natural gas producer as part of its “strategic bioenergy transition growth engine”.
“Our agreement on Archaea Energy is the most recent step in our strategic transformation of BP,” he added.
North Sea operations in Q3
In the reporting quarter, BP said it completed major seismic survey work west of Shetland to inform further development of high-quality UK oil and gas.
It also announced the first commercial supply of sustainable aviation fuel (Saf) to Aberdeen Airport for use on BP’s helicopter flights.
It also secured planning permission for the 1.25KM pipeline at Sullom Voe terminal in Shetland.
Meanwhile, BP said it expected to grow North Sea production to 20% to 30% as new fields Seagull and Murlach come on stream.
UK mulls windfall tax extension
It comes amid spiking interest once again in windfall taxes in the UK as oil majors round off their reporting for the third quarter.
Chancellor Jeremy Hunt and prime minister Rishi Sunak are thought to be mulling an increase in the UK windfall tax rate and a timeline extension ahead of the Autumn Budget next month.
If implemented, it could see North Sea operators paying a headline rate of 70% through to 2028.
Stuart Lamont, investment manager at RBC Brewin Dolphin, said: “Such robust results will only intensify the discussion around windfall taxes for oil and gas companies, as many households struggle with the cost of living.”
Some oil majors like Shell have backed further taxes in support of the most vulnerable.
Responding to the results, Philip Evans, oil and gas campaigner for Greenpeace UK, said: “Another week, another £7.1 billion banked by BP in profits, with billions to be paid out to investors.
“Meanwhile the homes of the poorest households in the UK urgently need insulation, the growing numbers in fuel poverty need financial support, and further investment in cheap renewables could lower our bills permanently.”
Social media platform Twitter broke out with comments from unions, journalists, NGOs and think tanks in reaction to BP.
Twitter on BP
George Dibb of the IPPR think tank highlighted that BP will spend nearly three times on buybacks this quarter than it expects to pay in UK windfall taxes ($800m) this year.
He also suggested a tax on buybacks, though it is unclear how that would play on global profits.
BP has just announced a huge quarterly profits of $8.2bn, almost triple same period last yr
$2.5bn is going straight back out to shareholders via buybacks
In the first 6mon of this year BP spent 10x as much buying its own shares as on renewables
Tax share buybacks now! https://t.co/QCplFpIGWg
— George Dibb (@GeorgeDibb) November 1, 2022
Sharon Graham, general secretary of the unite union said it shows the “economy is broken” and highlights a need “to bring the energy giants into public ownership”.
It’s time to stop tinkering at the edges. The Labour movement must seize the moment, take control of the debate and make the undeniable call to bring the energy giants into public ownership. @UniteEconomy 3/3
— Sharon Graham (@UniteSharon) November 1, 2022
Windfall tax ‘invitation’
Commentators have said this will appear as an invitation to Rishi Sunak to increase taxes on North Sea operators.
It was reported earlier this week that the new prime minister is considering an extension of the energy profits levy – which could see operators paying a 70% headline tax rate right through to 2028, rather than 65% to 2025.
BP made 3-month profit of $8.2bn, which was all cash, and is giving $2.5bn to shareholders via a share buyback. Giving away $2.5bn rather than investing it looks like an invitation by BP to a cash-strapped Sunak government to raise the 25% rate of the “windfall” oil and gas tax
— Robert Peston (@Peston) November 1, 2022
BREAKING: BP announces £7.2bn of underlying profits in 3 mths to Sept. Truss repeatedly said she would not introduce an oil & gas windfall tax but likely Sunak & Hunt will extend windfall tax (first introduced in May when Sunak was CX) in Autumn statement on Nov 17
— Beth Rigby (@BethRigby) November 1, 2022
Very few, including industry bodies, have shown support to BP on twitter, while politicians have given staunch condemnation of the figures.
Today’s BP profits are damning evidence of the failure of the Tories to levy a proper windfall tax.
Rishi Sunak should be hanging his head in shame that he has left billions of windfall profits in the pockets of oil + gas firms during an energy crisis. https://t.co/R6prSTLcgn
— Ed Miliband (@Ed_Miliband) November 1, 2022
The Autumn Budget is due to take place on November 17.
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