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Joe Biden accuses oil majors of ‘war profiteering’

U.S. president threatens higher taxes unless companies start increasing production

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LONDON — BP PLC more than doubled its third-quarter profit from a year earlier to US$8.15 billion, lifted by strong natural gas trading, as it expanded its share buybacks by US$2.5 billion amid rising calls to increase taxes on the energy sector.

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The London-based company joins rivals including Shell PLC, Exxon Mobil Corp. and TotalEnergies SE which also reported bumper profits last week that sparked calls from politicians to hit the sector with new windfall taxes to help governments with soaring energy bills.

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U.S. President Joe Biden on Monday called on major oil companies who are bringing in big profits to stop “war profiteering,” threatening to hit them with higher taxes if they don’t increase production.

BP said it expects to pay around US$2.5 billion in taxes for its British North Sea business this year, including US$800 million in a windfall tax.

The company paid US$5 billion in tax around the world in the quarter at a rate of 37 per cent, chief financial officer Murray Auchincloss told Reuters.

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Auchincloss would not comment on Biden’s comment, but said BP is increasing the number of drilling rigs in the Gulf of Mexico and shale basins to boost output.

Chief executive Bernard Looney is leading BP’s pivot away from oil and gas to renewables and low-carbon energy in an effort to slash greenhouse gas emissions. The company aims to reduce its oil and gas output by 40 per cent by 2030.

BP, which increased its dividend by 10 per cent in the quarter, will buy back US$2.5 billion of shares after repurchasing US$7.6 billion so far this year. BP has committed to using 60 per cent of its excess cashflow for shareholder returns.

BP shares were up 0.125 per cent by 0940 GMT, lagging a 1.2 per cent rise in the broader European energy index.

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“With the BP share price sitting near its highest levels this year, today’s Q3 numbers were always likely to be political catnip if they were anywhere near as good as Shell’s last week,” said Michael Hewson, chief market analyst at CMC Markets U.K.

BP’s shares have gained more than 45 per cent this year, buoyed by stronger oil and gas prices, but they have trailed gains by Shell and U.S. rivals Exxon Mobil and Chevron.

Gas trading

BP’s third-quarter underlying replacement cost profit of US$8.15 billion, the company’s definition of net income, compared with forecasts of a US$6 billion profit in a company-provided survey of analysts.

BP made a profit of US$3.3 billion a year earlier and a 14-year high profit of US$8.45 billion in the second quarter of 2022.

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Its latest result was helped by “an exceptional gas marketing and trading result” as well as higher gas prices, offsetting weaker refining margins and “average” oil trading.

Earnings from the gas and low energy division more than doubled from the second quarter.

Top U.S. LNG exporter Freeport LNG has informed BP it expects to resume cargo deliveries this month following a months-long outage, Auchincloss told Reuters.

BP holds the largest offtake contract from Freeport at 4.4 million tonnes per annum through 2040.

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While its net debt fell around US$800 million to US$22 billion, BP’s gearing, or debt-to-capital ratio, rose to 23.1 per cent from 21.9 per cent in the second quarter.

BP said it expected global gas prices to remain volatile in the forth quarter due to a lack of supply into Europe after Russia slashed its pipeline deliveries to the continent.

Refining margins are also expected to remain high due to sanctions on Russian crude oil and refined products, BP said.

© Thomson Reuters 2022

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