1st Nov 2022 16:39
(Alliance News) - Despite profit softening quarter-on-quarter, BP PLC still unveiled a bumper result on Tuesday, in addition to announcing plans to expand it share buybacks to around USD4.0 billion per year.
Richard Hunter, head of markets at interactive investor commented that, given the strength of recent earnings from its peer on both sides of the Atlantic - with Exxon Mobil Corp, Chevron Corp, and Shell PLC all enjoying impressive profit this past quarter - it is of "little surprise" that BP has joined the party.
The British oil and gas major swung to a pretax profit of USD1.98 billion in the third quarter of 2022, from a loss of USD495 million a year before.
The firm's third-quarter profit, however, was significantly lower than GBP14.06 billion in the second quarter to June 30.
By the firm's preferred measure, meanwhile, profit more than doubled year-on-year to an underlying replacement cost profit of USD8.15 billion, from USD3.32 billion a year prior.
This was lower than the USD8.45 billion profit in the second quarter. However, as Russ Mould, investment director at AJ Bell, pointed out, for anyone facing eye-watering increases in their energy bills at the moment, even these lower quarterly results will still "be like a red rag to a bull".
Rises in oil prices have been the major factor enabling the success of BP and its peers in recent times. Despite a recent dip relating to demand concerns in the event of a global recession, the price of oil remains up by around 21% in the year to date.
Prices have been turbocharged by a demand/supply imbalance resulting from the Russian invasion of Ukraine.
For its third quarter, BP said the average oil marker price for Brent was at USD100.84 per barrel, up 37% from USD73.51 a year prior but down 11% from USD113.93 in the second quarter.
Given the rising oil prices have come about due to the ruinous war in Ukraine, AJ Bell's Russ Mould said today's results and extra cash on offer for shareholders will "only add to the mounting clamour for an extended windfall tax on what are deemed excessive profits" by the likes of BP.
Michael Hewson, a chief market analyst at CMC Markets, agreed: "[BP's] Q3 numbers were always likely to be political catnip if they were anywhere near as good as Shell's last week. The fact that they beat expectations by quite some distance is likely to see the headlines dominated by calls for the current windfall tax bar to be set higher."
According to reporting from the Financial Times on October 19, the new UK Chancellor Jeremy Hunt is mulling extending a windfall tax on oil and gas producers.
On Monday, a White House official said that US President Joe Biden plans to seek tax penalties for oil companies unless they invest their record profit in lowering household costs and ramping up production.
Even Shell PLC's own departing Chief Executive Ben van Beurden said governments should "probably" tax energy firms more to help protect the poorest from rocketing electricity and gas bills and ease the cost-of-living crisis.
AJ Bell's Mould admitted there was a "strong" case for BP paying more to help shoulder the costs of any support package from the UK government.
"However," he cautioned, "what sometimes gets lost in this debate is that BP is an international business and that all but a relatively small chunk of its earnings is outside the remit of the HMRC."
"Because the existing windfall levy can be offset by investment BP makes in the UK it is only paying a little bit on top of what it already does to the Exchequer," he continued.
For Oanda's Craig Erlam, finding the "right balance" between taxing profits without deterring investment "won't be easy", "especially when the politics of it all is taken into consideration".
Shares in BP closed up 1.4% at 486.46 pence on Tuesday afternoon in London. In the year-to-date, the stock has risen 36%.
By Heather Rydings; [email protected]
Copyright 2022 Alliance News Limited. All Rights Reserved.
Related Shares:
BPShell