On Tuesday, BP plc, one of the world’s largest oil companies, reported its earnings for the second quarter of the current financial year.
In the second quarter from April to June, the net profit of the oil company hit 9.3 billion dollars. This was a rebound from earlier quarter earnings, as the London-based company suffered huge losses due to editing of its business from Russia. Along with various western tech and services companies, BP Plc had also decided to exit from Russia following its invasion of Ukraine.
The company was forced to write down huge losses in the first quarter due to its exit from Russia. The company posted a loss of nearly 20 billion dollars in the first quarter.
The 9 billion dollars net profit of this quarter is also nearly threefold increase from what was the net profit in the second quarter of the previous financial year.
Even though the company saw a rebound in its profits and revenue in the second quarter of the financial year, analysing the overall performance of the company in the first half of 2022 shows that the company is still running on a net loss of 11.1 billion dollars.
The major reason for posting a net loss in the first half of the year is the huge 24.4 billion dollar charge the oil entity had to bear for exiting Russian operations. A huge part of the charge is directly linked to the company relinquishing its stake of 19.75% in Russian oil giant Rosneft.
Even though the skyrocketing oil prices during the Russia-Ukraine conflict helped the company make huge profits and revenue, exiting procedure and affiliated costs wiped away the books.
Prediction and Forecasts
The company on Tuesday also made predictions and forecasts for the third quarter, which ends in September 2022. Various factors such as disruption in the supply of oil from Russia, reduction in level of spare capacity and very low level of inventory would keep the oil prices above average at an elevated level.
If the ongoing conflict between Russia and Ukraine continues and Russia decides to squeeze oil supplies to Europe as part of retaliating against western sanctions, the oil prices are going to stay highly elevated and volatile. Russia is the third-largest oil producer in the world, behind the USA and Saudi Arabia. Before the beginning of the conflict by Ukraine, Russia was the major player who supplied the European continent with oil and gas.
It is also important to note that the United Kingdom, where BP plc is based, is facing one of the worst inflation in its economic history since 1982. The inflation levels as of June 2022 are 9.4%. The major factor for this high level of inflation is high oil prices in the international market.