BP shares climb after record profits

Inevitably this has led to more calls for windfall taxes, but in an economy where taxation is already high, any further uplift will start discussions within the company to be registered elsewhere.

(Video Transcript)

BP records record earnings

Another big oil company, another set of record earnings. This time it's the London- listed BP, as the oil giant has seen its shares rise three and three quarter percent out of the gate this morning as a result of the news that's come through where the company has said that profits have doubled to a record $27.7 billion lifted by a surge in energy prices seen since the Russian invasion of Ukraine in the fourth quarter.

Underlying replacement cost profit, this is the company's definition of net income, reached $4.8 billion, compared with forecasts of $5 billion profit in a company-provided a survey of analysts, so that fell short of expectations. But the company has announced a further $2.75 billion in buybacks and proposing a dividend of 6.61 cents per share.

There are now more calls coming through from many within the green lobby and those outside as well, suggesting that these big oil companies should have further taxes given to them on their excess windfall profits because of this rise in prices. The problem with that is that we've been hearing a lot of flexibility within the industry in suggesting perhaps maybe that if BP is faced with further tax rises, it might actually possibly take its business offshore. So that could well be a bit of a headwind.

Ironically, these oil companies are now benefiting from a lack of investment over the last few years to pacify the green lobby, which has managed to persuade big oil to invest in renewables. And this has led to a lack of new oil coming onto the market, which has supported prices.

Share price chart

Let's take a look at the BP share price, because this is the long-term chart. We're not too far away from the recent highs - well highs we saw around about three years ago at 508 pence, currently trading at 496.1.

The significance of that 508 is that it was the highs we saw back in January 2020. And if it tips over that, we’re then at levels not seen since November 2019. So you can see there's an upward impetus.

This red candle here was the date in which we saw Shell's record profits coming through at $40 billion. Now, that was a day when we saw negativity to the oil markets generally because of those numbers. But this today has seen this big uplift in shares. And if it closes at these levels, it'll be the highest close we've seen on the BP share price since November last year.

So clearly, investors liking what they're seeing, but holding guard until the government establishes whether or not it wants to increase the windfall tax, which they said could well put pressure on boards to discuss possibly moving some, if not all, of its operations offshore. And that would be a tragedy to the UK economy.