BP’s profits more than doubled in the third quarter to $8.2bn (£7.1bn), even as it paid the Government’s windfall tax for the first time.
On the back of soaring oil and gas prices, the energy giant’s earnings for July to September were up from $3.3bn a year ago.
But unlike rival Shell, which did not pay the windfall tax due to investments, BP revealed it had booked $778m to pay under the new “energy profits levy”. The tax payment amounts to around 9.5pc of BP’s profits in the third quarter.
The temporary tax on North Sea profits was introduced in May by then-chancellor Rishi Sunak after the surge in oil and gas prices caused by the Ukraine war. It applies until December 2025.
However, BP’s strong performance comes as the Government is drawing up plans to expand the windfall tax.
Mr Sunak, the new Prime Minister, is understood to be considering a range of proposals including increasing the levy, extending the deadline and expanding its remit to include renewable energy generators such as wind farms.
BP said the current levy resulted in its effective tax rate ticking up marginally, to 37pc in the third quarter. The amount it paid in the third quarter amounted to about 9.5pc of its profits.
The company’s strong profits were driven by “exceptional” gas marketing and trading, even as oil prices eased.
Bernard Looney, BP’s boss, said: “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.”
The chief executive is said to have raised eyebrows in Whitehall earlier this year when he described his company as a “cash machine”, before the windfall tax was introduced.
In a boost to shareholders on Tuesday, BP announced another share buyback worth $2.5bn in the fourth quarter.
Joshua Warner, market analyst at City Index, said BP’s quarterly profits were “another big beat” for the company, as analysts had expected $6.2bn.
But he added: “Profits are down from the record figures we saw in the second quarter, which does raise the question of whether we have reached the peak.
“Still, BP is confident oil prices will remain elevated in the fourth quarter after OPEC+ [the oil producers’ cartel] agreed to cut supplies, while the war in Ukraine and sanctions on Russia means natural gas prices are likely to remain high across Europe.”
However, Friends of the Earth said the figures showed the need for a bigger windfall tax, accusing oil and gas companies of using “ridiculous loopholes” to pay “the bare minimum”.
The groups’ energy spokesman, Sana Yusuf, said: “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.”
Alok Sharma, the president of COP26 and the Government’s climate tsar, backed an expansion of the energy windfall tax. Mr Sharma said: “We need to raise more money from a windfall tax on oil and gas companies and actively encourage them to invest in renewables.”
BP’s payment of the energy profits levy was in contrast to Shell, which said it had not paid the tax due to large investments in the UK. The Government has said it expects the levy to raise £5bn a year.
Ministers introduced the measure after oil and gas prices surged in the wake of Russia’s invasion of Ukraine.
The price rises have driven higher fuel and energy bills for millions of households.
In a bid to limit the damage, the Government is limiting the price of gas and electricity this winter under the Energy Price Guarantee.
However, after initially promising it would last for two years, the guarantee will now end in its current form in April and be replaced with a new scheme targeted at “those in need”, Chancellor Jeremy Hunt announced.
Source: https://finance.yahoo.com/news/bp-hit-windfall-tax-profit-093213021.html