Russia exit pushes BP into $23bn loss but underlying profits soar on higher prices

Energy giant BP swung to a massive first quarter loss as it took a $24bn writedown on its decision to exit its Russian interests, the company said on Tuesday, but underlying profits soared on higher oil and gas prices.

It posted a replacement cost loss of $23bn, compared with a profit of $1.9bn a year ago and warned of “an ongoing elevated risk of oil price volatility” reflecting uncertainties around the level of disruption to Russian supply, the capacity for increased OPEC+ supply, the ongoing impact of Covid-19 on demand and the impact of the Ukraine war on economic growth.

The company took a $24bn writedown on its 19.75% stake in Russian oil major Rosneft and two other joint ventures.

On an underlying basis, replacement cost profit, BP’s measure of net earnings, rose to $6.25bn as oil and gas prices soared compared with $2.63bn a year ago and far exceeding analysts' expectations of $4.49bn. It was the company's best performance in a decade.

BP added that the short-term outlook for gas prices would remain heavily dependent on Russian pipeline flows to Europe. Countries across the continent are looking to source supplies from elsewhere as the West looks to strangle the flow of cash to Moscow and hinder its ability to wage war on Ukraine.

It also expects industry refining margins in the second quarter to remain elevated due to ongoing supply disruptions, particularly in Russia and Europe.

As the extra cash poured in, BP held its dividend and committed to buying back $2.5bn of shares in the second quarter of 2022 after completing buybacks of $1.6bn in the first three months of the year.

“In a quarter dominated by the tragic events in Ukraine and volatility in energy markets, BP’s focus has been on supplying the reliable energy our customers need,” said chief executive Bernard Looney.