BP profits more than double to £7.1bn amid windfall tax pressure

It came as BP confirmed it will be hit by the windfall tax on its UK operations this year, unlike rival Shell.

The London-listed oil giant reported that underlying replacement cost profits – a measure preferred by BP – surged to 8.2bn US dollars (£7.1bn) for the quarter to September, compared with 3.3bn dollars (£2.9bn) a year earlier.

It was significantly ahead of the 6.1bn dollars (£5.3bn) expected by market analysts. Nevertheless, BP said profits were weaker than the previous quarter after a dip in average oil price.

In June, the cost of a barrel of Brent crude oil hovered at around 114 dollars per barrel, but since early July the measure has rarely risen above the 100-dollar line. On Tuesday, a barrel of crude would set a buyer back around 94 dollars (£81).

Energy prices are, however, still at elevated levels following the Russian invasion of Ukraine and therefore set to weigh heavily on household budgets over winter. BP confirmed that it will pay UK windfall taxes this year.

It told shareholders it will pay out 2.5bn dollars (£2.2bn) in taxes for its UK North Sea business in 2022, as well as 800m dollars (£695m) of tax related to the energy profits levy.

Chief executive Bernard 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. Our agreement on Archaea Energy is the most recent step in our strategic transformation of BP.”

Richard Hunter, Head of Markets at interactive investor, commented “Given the strength of recent results from its peers on both sides of the pond, it is of little surprise that BP has also joined the party while keeping a firm eye on the future.

"While underlying replacement cost profit slipped to $8.15bn from the bumper previous quarter of $8.5bn, the figure is well in excess of the expected $6.1bn and significantly higher than the corresponding period a year previous of $3.3bn. Weaker refining margins and lower liquid realisations weighed on the quarterly result, although improvements in gas marketing and realisations partially offset the weakness.

"From a broad perspective, however, the company is in increasingly strong shape, enabling it to pursue its longer term ambitions of becoming an integrated energy company. Surplus cash flow for the quarter was $3.5bn, and net debt was reduced for the tenth consecutive quarter. Net debt now stands at $22bn, as compared to $23bn the previous quarter and $32bn a year ago.”

He added: “The oil majors remain core components of many standard portfolios, given their extraordinary cash generation and high levels of shareholder returns when circumstances allow.

"For BP, an increase in the share price over the last year of 37 per cent compares to a dip of almost 3 per cent for the wider FTSE100, providing a double whammy of heightened capital and income returns. As the group’s strategy continues to evolve amid such huge cash generation, prospects remain bright, with the market consensus of the shares as a buy highly likely to remain intact.”