BP’s profits fall to lowest level in four years as oil and gas industry braces for fiscal budget raid

BP yesterday posted its lowest quarterly profit since the pandemic, as the oil and gas industry braced for a fiscal budget bust.

The energy giant’s revenues fell 30 percent to £1.8 billion in the third quarter – the lowest level in four years – due to a slowdown in global economic activity and oil demand, especially in China.

While profits exceeded analyst expectations, the decline puts additional scrutiny on boss Murray Auchincloss, who has come under pressure to improve BP’s performance.

Auchincloss, who took over from disgraced former CEO Bernard Looney this year, shed no light on the oil giant’s future strategy after reports that BP is backtracking on its switch to green energy.

It comes as Chancellor Rachel Reeves is today expected to increase the windfall tax on energy companies’ profits, bringing the total levy on the industry to 78 percent, one of the highest in the world.

The windfall tax, originally introduced in response to rising energy prices following Russia’s invasion of Ukraine, will also be extended until the end of this decade.

And in a further setback for the oil and gas sector, the government is also preparing to remove tax incentives for investments and block new exploration permits.

Analysts said the impact of the windfall tax would be very small for BP due to its limited activities in the North Sea.

But the company will be hit by the removal of investment subsidies, which could accelerate decommissioning and boost capital expenditure.

It comes as investors seek clarity on BP’s strategy amid concerns that the energy giant has underperformed against London-listed rival Shell and US rivals Chevron and ExxonMobil.

Auchincloss, formerly BP’s chief financial officer, sought to reassure shareholders, saying: ‘I am absolutely clear that the actions we are taking will increase BP’s value.’

And the company announced a £1.35 billion share buyback, keeping its promise to buy back £2.7 billion of shares in the second half of the year.

AJ Bell’s Russ Mold said the earnings reports “will have done little to ease the pressure on the Canadian-born businessman.”

“While better than nothing, buybacks alone will clearly not be enough to win over the market, especially against the backdrop of lower profits and cash flows and rising debt,” he said.

“Ultimately, BP still has a lot of work to do to convince investors that it has a clear strategy for the future.”

John Moore of asset manager RBC Brewin Dolphin said share buybacks and dividends would be “welcome by the market”, but he said “there was a sense of uncertainty around the company’s strategic financial priorities”.