BP posts profits of $3.3bn as oil prices rise again

Energy giant BP has reported lower-than-expected profits despite the recent increase in global oil prices.

In the period between July and September, the company recorded profits of $3.3 billion (£2.7 billion), falling short of the predicted $4 billion.

This figure marks a decline from the $8.1 billion earned during the same period in 2022 when BP capitalized on soaring oil prices following Russia’s invasion of Ukraine.

Although oil prices have risen in recent times, they are still lower than the levels seen during that period.

BP acknowledged that while oil production remained robust, gas trading had been weak in recent months.

These latest financial results are the first to be released after Bernard Looney resigned as the company’s chief executive in September, following an internal review of his personal relationships with colleagues.

Mr. Looney, who had been at the helm since 2020, stepped down with immediate effect.

While BP’s profits for the three-month period ending in September fell below analysts’ predictions, earnings did increase compared to the previous quarter, rising to $2.6 billion.

Murray Auchincloss, the interim chief executive, described the quarter as “solid” and expressed optimism about the company’s ability to generate earnings and deliver strong returns for shareholders throughout the decade.

BP attributed the rise in profits from earlier this year to higher oil refining margins and increased oil and gas production.

However, it highlighted that weak gas marketing and trading partly offset the gains made from oil.

The company also warned that it anticipates refining margins in the oil and gas industry to significantly decline by the end of 2023.

In addition, BP revealed a $540 million charge related to three wind farm projects off the coast of New York. The company, in partnership with Norway’s Equinor, failed to renegotiate agreements with authorities to mitigate the impact of inflation and delays.

In recent years, the surge in oil and gas prices has resulted in higher energy bills for households and businesses. Consequently, the government introduced a windfall tax on oil giants such as BP and Shell.

A windfall tax is a one-time levy imposed on companies that profit from a situation they were not responsible for, in this case, the sharp rise in oil prices following Russia’s invasion of Ukraine.

The windfall tax policy, currently valid until March 2028, mandates these firms to pay 35% on their UK profits.

Oil and gas companies operating in the North Sea are already subject to different tax regulations, paying a 30% corporation tax in addition to a supplementary 10% rate. As a result, these firms face a total tax rate of 75% when combined with the windfall tax.

Critics argue that such a high tax rate could hamper investment in UK projects.

BP disclosed that during the first nine months of 2023, it paid approximately $1.35 billion in tax for its North Sea operations, with $620 million attributed to the windfall tax. In 2022, the company paid $2.2 billion in tax, with $700 million resulting from the policy.