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BP has revealed its lowest quarterly profit since the pandemic as the oil and gas industry braces for a tax raid in the Budget.
The oil giant’s underlying profits fell from $2.8bn (£2.2bn) in the second quarter to $2.3bn (£1.8bn) in the third quarter amid weak oil trading and a slump in refining margins.
Although the profits were better than analysts expected, earnings were down 30pc from the $3.3bn (£2.5bn) reported this time last year.
The slide in margins comes partly as a result of a more general downturn in global demand for oil recently. Brent crude has fallen from a high of around $91 a barrel in March to $71 today.
John Moore, senior investment manager at RBC Brewin Dolphin, said: “Against a backdrop of difficult trading conditions, this last quarter has not been plain sailing for BP and profit is considerably lower than it was this time last year.
“Oil price conditions, combined with the costs associated with simplification of the business has put BP on the back foot.”
The downturn comes as BP and the rest of the UK oil industry braces for a tax raid in the budget.
Chancellor Rachel Reeves is expected to announce an increase in windfall taxes on energy giants and confirm the removal of investment allowances for oil and gas companies from November.
Ashley Kelty, an analyst at Panmure Liberum, said: “The actual impact of the windfall tax is likely to be very, very small” on BP, given its limited operations in the North Sea.
He said: “The bigger issue is going to be the removal of investment allowances, which is going to bring forward decommissioning by about two years across the board.
“That is more likely to make an impact on BP because obviously the decommissioning costs [mean] their capital expenditure will go up.”
He pointed to research from Rystad Energy, which showed that the removal of investment allowances will mean the North Sea will shut down at least two years earlier than it otherwise would have.
“The windfall tax will end up costing UK plc more than it will generate because of the increased decommissioning,” said Mr Kelty.
The Treasury offers tax relief on decommissioning, with the cost to the state from the decline of the North Sea expected to run into the tens of billions of pounds.
