BP under pressure as profits rocket

Hard hat time at BP, after the oil giant reported a 23% profit hike in the first half of this year...

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Last Updated: 31 Aug 2010

Oil giant BP said this morning that replacement cost profit, the standard income measure for oil companies, hit $13.4bn in the first six month of 2008, a 23% increase on the previous year’s figure. This followed a record second quarter, when BP raked in profits of $6.9m – an all-time high – as the oil price soared above the $140/ barrel mark. In fact, it’s churning out so much cash that it’s even managed to buy back $2bn in shares and hiked its dividend by 30%. Make hay while the sun shines, as they say…

Not surprisingly, most of BP’s profit came from its ‘upstream’ exploration and production activities, i.e. getting the black gold out of the ground and selling it to the fevered market. However, its refining and marketing fared less well – despite an increase in throughput (as BP continued to put the problems at its US refineries behind it), an ongoing squeeze on margins meant these ‘downstream’ activities delivered just $539m in profit, down from $2.7bn last year.

Another reason for the strong performance was the success of Russian joint venture TNK-BP, which is currently the subject of a huge row between BP and the four oligarchs who control its Russian partner. BP didn’t give specific figures for TNK, but admitted that the results ‘included higher earnings from equity accounting entities, primarily from TNK-BP’. So it’s no wonder that it’s unwilling to cede to the oligarchs’ demands without a fight, even though the task looks more difficult after the expulsion of CEO Robert Dudley last week and the apparent connivance of the Russian authorities.

News of BP’s booming finances will no doubt delight shareholders, but it’s gone down like an unleaded balloon with unions and pressure groups, who are already demanding that the Government impose some kind of windfall tax on the big oil companies to help offset soaring fuel prices. ‘It is high time that our government moved to stop these fuel corporates picking the pockets of the poor and needy', said Unite’s Tony Woodley. ‘Tax the fuel companies now so that those who helped to create these mega-profits get their rightful share of them.’

As you’d expect, BP isn’t keen on the windfall tax idea. It points out, not unreasonably, that it already contributes more than most to the Treasury’s tax coffers – $14bn worldwide last year (including $2.5bn in the UK), it told the BBC today. But whatever the rights and wrongs of the situation, results like these will only fuel the perception that BP is profiteering at all our expense...


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