Tax changes to aid BP earnings
New focus to North Sea operation
However, the first quarter profit was much higher than the $1.3bn expected by analysts.
Kim Fustier, analyst at Edison Investment Research, said the out-performance was largely thanks to one-off tax changes, noting that BP booked the benefit of cuts in North Sea rates included in the Budget during the quarter.
The company said the changes meant it recorded a negative tax rate of 21 per cent on applicable profits, compared with a positive rate of 33 per cent for the first quarter of 2014.
It did not disclose details. Given the profits made by BP, the statement implies the tax changes will be worth hundreds of millions of dollars over time. The benefits will be felt over the period that the revised rates remain in force, rather than immediately.
On Monday Centrica, which owns Scottish Gas, said the tax changes were positive for its oil and gas business but would have little impact this year.
BP’s comments will boost hopes the tax changes will provide a long term boost to activity in the North Sea.
Last week Mr Dudley said the high cost North Sea faced a painful adjustment to the oil price fall.
However, the first quarter results announcement did not refer to any further North Sea asset sales or changes in the value of the company’s portfolio in the area.
In the final quarter of 2014 BP wrote down the value of its North Sea portfolio by $5bn. It is focusing investment on a relatively narrow range of big projects. These include the giant Clair Ridge development West of Shetland.
The company last week sold its stake in the CATS pipeline system in the North Sea for £324m. This took the total value of divestments to $7.1bn under a plan to offload $10bn by the end of this year, announced in 2013.
The company has cut its global budget for spending on new projects by 13 per cent, to $20bn, this year.
BP’s exploration and production arm made a quarterly underlying profit of $0.6bn compared with $4.4bn last time. The company got an average $54 per barrel for Brent crude, against $108 per barrel in the first quarter of 2014.
The refining and marketing division doubled profits to $2.2bn.
BP recorded $330m charges in the quarter for the spill on its acreage in the Gulf of Mexico in 2010, taking the total cost to $43.8bn.
It will pay a dividend of 10 cents per share, in line with the fourth quarter. BP shares closed down 0.8p at 476.1p.
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e are resetting and rebalancing BP to meet the challenges of a possible period of sustained lower prices