BP profits soar to highest in 10 years as calls grow for windfall tax

·Finance Reporter, Yahoo Finance UK
·4-min read
BP's quarterly net profits were achieved thanks higher oil and gas prices. Photo: Andrew Kelly/Reuters
BP's quarterly net profits were achieved thanks higher oil and gas prices. Photo: Andrew Kelly/Reuters

Soaring oil and gas prices has led BP (BP.L) to record its highest quarterly profits in a decade, prompting calls for a windfall tax on energy firms to help UK families with rising household bills.

The oil giant reported an underlying profit of $6.2bn (£4.9bn) for the first three months of this year compared to $2.6bn in the same period last year.

Operating profits were boosted by “exceptional oil and gas trading” and higher prices, as oil and gas prices soared due to the war in Ukraine.

The bumper earnings have prompted calls for a one-off windfall tax on energy companies to help UK households with rising bills.

Labour’s shadow chancellor, Rachel Reeves, says the case for a windfall tax to help families struggling with higher energy bills “cannot be ignored”.

Liberal Democrat leader Ed Davey is also calling for a windfall tax on energy firms.

"The Conservative government's refusal to introduce a windfall tax on the super profits of oil companies is becoming impossible to justify," he told BBC Breakfast. "BP is raking in eye-watering profits while millions of people struggle to pay the bills."

Davey said energy companies should "pay a little more” to help the most vulnerable.

Read more: BP makes £3bn profit in three months as millions face nightmare gas and electricity bills

“It is an unforgivable lack of leadership from Boris Johnson at a time of national crisis.

“Oil companies are handing out huge dividends and buying back shares, they could easily afford to pay a little more to help the most vulnerable.”

Green Party MP Caroline Lucas is also arguing for a windfall tax to help struggling families.

Trades Union Congress (TUC) general secretary Frances O’Grady said: “At a time when households across Britain are being hammered by soaring bills and prices these profits are obscene.

“The government must stop making excuses and impose a windfall tax on oil and gas companies. The money raised should bring down costs for struggling families.”

The government seems split over the idea, with business secretary, Kwasi Kwarteng, telling Sky News: “I’ve never been a supporter of windfall taxes. I have been very clear on that publicly, I think it discourages investment and the reason why we want to have investment is because it creates jobs, it creates wealth and it also gives us energy security.”

Chancellor Rishi Sunak previously said he would explore a policy if the companies did not invest enough in the UK's energy supply.

Announcing profits, chief executive Bernard Looney said: "We're backing Britain".

He told investors: "In a quarter dominated by the tragic events in Ukraine and volatility in energy markets, BP's focus has been on supplying the reliable energy our customers need."

BP announced plans to invest £18bn in the UK by 2030 on oil and gas, wind farms, hydrogen, and electric vehicle infrastructure.

Read more: BP to offload stake in Rosneft and take $25bn hit

But the oil major also revealed it has taken charges totalling $24.4bn to cover its exit from Russia, where it is abandoning its stake in Russian producer Rosneft (ROSN.ME).

Including the cost of exiting its 19.75% shareholding in Rosneft, BP reported a loss of $20.3bn for the first quarter.

“Our decision in February to exit our shareholding in Rosneft resulted in the material non-cash charges and headline loss we reported today. But it has not changed our strategy, our financial frame, or our expectations for shareholder distributions,” Looney said.

BP maintained its dividend of 5.46 cents per shares and said it would buyback $2.5bn of its shares in the next few months, following $1.6bn of buybacks so far this year.

“We are delivering on our commitment to shareholder distributions,” said CFO Murrya Auchincloss.

Shares in BP rose over 2% in early trading, after its underlying profits beat expectations in the last quarter.

Michael Hewson, chief market analyst at CMC Markets, said: "Today’s Q1 numbers from BP certainly serve to reinforce the argument that the industry has done well from the sharp moves higher in oil and gas prices, however this is just as well given that BP has had to take a $29.3bn write down in respect of its exposure Rosneft business, which has seen the company slide to an attributable loss to shareholders of $20.38bn, compared to a $4.67bn profit a year ago."

The stock is up 20% up in the year to date.

Watch: Why are gas prices rising

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