Energy group BP this morning reported profits of just under £4billion for the first quarter of this year, but this was down 20% on Q1 of 2022 as lower oil and gas prices took their toll.
However, profits in the latest quarter were still ahead of the £3.8billion profits achieved in Q4 of 2022.
The first-quarter profits were stronger than expected by analysts, and will no doubt lead to fresh calls for even-higher windfall taxes on UK North Sea oil and gas producers.
But market watchers point out that those pushing for higher taxes on UK-based international energy groups like BP don’t seem to understand that their profits generated abroad aren’t subject to the windfall levy imposed by the British Government.
BP said today that, compared to Q4 2022, the Q1 result reflected an “exceptional” gas marketing and trading result, a lower level of refinery-turnaround activity and a very strong oil trading result, partly offset by lower liquids and gas realisations and lower refining margins.
CEO Bernard Looney said: “This has been a quarter of strong performance and strategic delivery as we continue to focus on safe and reliable operations.
Momemntum building
“Momentum continues to build across our integrated energy company strategy, with the start-up of Mad Dog Phase 2 (in the Gulf of Mexico), our agreement to acquire TravelCenters of America and progress towards hydrogen and carbon-capture and storage (CCS) projects in the UK.
“And, importantly, we continue to deliver for shareholders, through disciplined investment, lowering net debt and growing distributions.”
Chief financial officer Murray Auchincloss added that BP was strengthening the balance sheet, investing with discipline to advance its strategy, and is committed to returning 60% of 2023 surplus cash flow through share buybacks with a further £1.4billion announced for the first quarter.
BP said that, in low-carbon energy, it had signed an agreement to take a 40% stake in the Viking CCS project in the North Sea.
Meanwhile, three BP-led hydrogen and CCS projects in the north-east England have been chosen by the UK Government to progress to the next stage of development.
And BP has launched plans for a low-carbon green-energy cluster in Spain's Valencia region to include world-scale green hydrogen production at its Castellon refinery with up to 2GW of electrolysis capacity by 2030.
Oil prices 'to remain elevated'
BP said that, for Q2, it expects oil prices to remain elevated as the recent decision by Opec+ to restrict production combined with strengthening Chinese demand tightens supply/demand balances.
The company also anticipates its second quarter reported upstream production to be lower compared to Q1 in both oil production & operations and gas & low-carbon energy, including the effects of seasonal maintenance, with the impact predominantly in higher-margin regions.
BP was in the news last week when some of the UK's biggest pension funds voted against reappointing the company’s chairman over a decision to weaken its climate plans.
But the majority of shareholders still backed Helge Lund.
The move at the energy giant’s AGM came after it cut back its target to reduce emissions.
BP said it valued "constructive challenge and engagement".
Emissions
The original target to reduce emissions was agreed by shareholders in 2022 and included a promise to cut greenhouse-gas emissions by 35% to 40% by the end of this decade.
But, in February, BP announced it was now aiming for a 20% to 30% cut, so it could produce more oil and gas and extend the life of existing fossil-fuel projects.
CEO Mr Looney says this was in response to increased concerns about energy security following the invasion of Ukraine.