3rd May 2022 14:53
(Alliance News) - BP PLC's plan to return cash to shareholders intensified calls by some UK politicians for a windfall profit tax on energy companies as millions of low income households fall behind on household bills.
UK Prime Minister Boris Johnson on Tuesday acknowledged there was more that could be done to help address the cost-of-living crisis despite insisting the government was doing "everything we can".
The PM warned that increasing spending to prop up household finances could fuel inflation rising even faster.
Johnson appeared on ITV's Good Morning Britain where he was challenged about the case of a 77-year-old viewer who has seen energy bill rise and food cut down to one meal a day.
The PM said there are "plenty of things more that we are doing", adding: "What we want to do is make sure that we have people who are in particular hardship looked after by their councils, so we are putting much more money into local councils.
"We have the particular payments to help elderly people in particular with the cost of heating."
However, Johnson warned that increasing state support beyond its current levels could drive inflation even higher.
His comments came as BP announced soaring underlying profit.
BP on Tuesday said it swung to a first-quarter loss due to its decision to exit from its shareholding in Rosneft in response to Moscow's invasion of Ukraine; however on an underlying basis, the oil major reported a big jump in profit.
For the three months that ended March 31, BP swung to an attributable loss of USD20.38 billion from a USD4.67 billion profit in the first quarter last year. BP said the reported result included pretax adjusted items of USD30.8 billion.
By its preferred metric, BP swung to a replacement cost loss of USD23.04 billion from a replacement cost profit of USD3.33 billion the year before.
The London-based firm attributed the loss to its decision to exit its 19.75% shareholding in state-owned Russian oil firm Rosneft. BP said that, in the first quarter, the total post-tax charge for this was USD25.5 billion.
However, on an underlying replacement cost basis - which strips out the one-off charge - BP reported a profit of USD6.25 billion, up 54% from USD4.07 billion in the fourth quarter of last year and more than doubled from USD2.63 billion a year ago due to higher oil prices.
In early March, Brent hit a high of USD139.13, its bet level since July 2008.
Turning to shareholder returns, BP raised its first-quarter dividend by 4.0% to 5.46 cents from 5.25 cents the year before. It also announced a further share buyback. BP said it plans to execute a USD2.5 billion share buyback before announcing its second-quarter results.
Supporting the buyback, BP generated USD4.1 billion in surplus cash flow in the first quarter, it said. The company said it remains committed to using 60% of surplus cash flow for buybacks and the remaining 40% to pay down debt. Net debt was reduced to USD27.46 billion from USD30.61 billion at the end of 2021 and USD33.31 billion a year ago.
Looking ahead, BP said it expects the short-term outlook for gas prices to remain heavily dependent on Russian pipeline flows to Europe.
Under pressure from opposition politicians to impose a one-off levy on oil company profit, Johnson said: "If you put a windfall tax on the energy companies, what that means is that you discourage them from making the investments that we want to see that will, in the end, keep energy prices lower for everybody."
A windfall tax is a one-off tax imposed on a company or group of companies and was introduced by Tony Blair's Labour government in 1997.
AJ Bell's Russ Mould commented: "The argument for the windfall tax goes something like this - BP's profit and cash flow is being artificially inflated by the war in Ukraine and ordinary people are already paying the price through much higher household bills. Shouldn't BP, with its broader shoulders, share the burden? Particularly given it feels able to boost shareholder returns with an enhanced share buyback programme.
"It was no surprise to hear Chief Executive Bernard Looney talking about 'backing Britain' and flagging billions of pounds worth of investment in projects to boost domestic energy security. Whether this will be enough to stave off a new levy remains to be seen. The political pressure to do so is only likely to escalate as the cost of living continues to surge in the UK."
The stock was up 4.1% at 407.50 pence on Tuesday, among the best blue-chip performers.
By Arvind Bhunjun; [email protected]
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