BP reported a big jump in its underlying profit for the first quarter on the back of higher oil and gas prices. But the company's bottom line was pushed deep into the red because of more than $25bn of impairment charges connected to its decision to exit its 19.75pc shareholding in Rosneft and other businesses in Russia.
The firm's underlying replacement cost profit — which excludes impairment charges, other one-off items and inventory valuation effects — was $6.25bn for the first three months of this year, more than $2bn higher than the previous quarter and up by 137pc on the same period last year. The consensus among analysts was that BP would deliver around $4.5bn in underlying profit.
With regards to Rosneft, BP said that from 27 February it has no longer accounted for its interest in the Russian company. BP took $24.6bn of pre-tax charges connected to its stake in Rosneft, comprising a $13.5bn impairment charge related to the full carrying value of the Rosneft investment at 27 February, and an $11.1bn charge arising from foreign exchange losses accumulated since 2013 — the year of BP's initial investment in Rosneft. BP has also written off $1.5bn connected to its other businesses with Rosneft in Russia. These charges were mitigated to a small extent by a $500mn offset representing BP's share of Rosneft's post-tax income during the first quarter.
BP reported upstream oil and gas production of 2.25mn b/d of oil equivalent (boe/d) for January-March — which was 1.5pc higher than the equivalent period in 2021. In the second quarter, the company expects production to be lower than this, reflecting base decline and seasonal maintenance. For the year as a whole, BP is guiding for output to be broadly flat compared with 2021.
In the downstream sector, the company's average refining marker margin was $18.9/bl during the period, compared with $15.1/bl in fourth quarter 2021 and $8.7/bl in first quarter 2021, while its refining availability nudged higher by 0.2 percentage points year on year to 95pc. Refinery runs increased to 1.65mn b/d in January-March, from 1.6mn b/d a year earlier.
Separately, BP today confirmed plans to invest up to £18bn ($22.6bn) in the UK's energy system by the end of 2030. The UK government has faced calls to levy a windfall tax on BP and other businesses that operate in the country's upstream sector. UK finance minister Rishi Sunak said recently that he would look at windfall taxes if oil and gas profits were not reinvested in the UK and its energy security.
BP noted that it is developing lower emission oil and gas projects at the Murlach, Kate and Mungo fields in the central UK North Sea and at the Clair and Schiehallion fields west of Shetlands. The company also highlighted offshore wind schemes in the Irish Sea and off the east coast of Scotland.
"We're fully committed to the UK's energy transition — providing reliable home-grown energy and, at the same time, focusing on the drive to net zero. And we have ambitious plans to do more and to go faster," BP chief executive Bernard Looney said.
