BP reports $25.5 billion hit from Russia exit, shares still jump

We’re finally starting to see just how much of a financial hit energy companies have suffered since the war in Ukraine began. Big oil companies have alluded to massive write-offs after being forced to sell off their Russian assets over political concerns. Now shareholders got to see the full scope of the financial carnage. Energy giant BP (NYSE: BP) announced that it had suffered a $25.5 billion pre-tax accounting charge as it exited Russia.

The London-based energy giant said on Tuesday that this pre-tax charge was the reason why it reported a $20.4 billion net loss for its first quarter. This is despite energy commodity prices now at record highs, something that has otherwise been fattening up the bottom lines of most companies. However, management did promise that it would increase its dividends significantly due to high energy prices.

“We make more money at higher oil prices, and we use that to reward pensioners,” said BP CEO Bernard Looney in an interview. He also said that oil-and-gas production in the North Sea would need to pick back up to compensate for the loss of Russian assets. “These are things that become probably more attractive in today’s world,” he added.

Other big oil companies are also increasing their shareholder dividends. Exxon tripled its share-buyback program in 2022 to over $30 billion, while Chevron added that it would repurchase over $10 billion in stock by the end of the year.

While almost every big oil company operating in Russia suffered a one-time financial hit of some kind, the long-term impact of these losses isn’t expected to last for long. BP added that it plans to continue paying off its debt, which has decreased by over $3 billion since Q4 2021.

Shares of BP were up around 8.5% following the news announcement, while other energy stocks were in the green.

Besides oil prices still trading above $100 per barrel, gas prices recently broke another record. A perfect storm of conditions here in America has pushed natural gas to above $8 per mmbtu on Tuesday, the highest close since 2008. A combination of hot weather in the American southeast, growing export demand for natural gas, as well as rising coal prices have all created a perfect set of conditions for gas prices to surge.

All of this will only worsen inflation numbers, with metrics like the CPI being largely driven by volatile energy costs. While tough for most Americans, the obvious winners of this situation are energy investors. Gas companies will be reporting their Q1 results in the coming weeks, so we’ll see how gas businesses have fared in comparison to these big oil companies which has suffered big losses from selling their Russian assets.

BP Company Profile

BP is an integrated oil and gas company that explores for, produces, and refines oil around the world. In 2019, it produced 2.3 million barrels of liquids and 9.5 billion cubic feet of natural gas per day, including volumes from its 20% ownership interest in Rosneft. At year-end 2018, reserves stood at 19.9 billion barrels of oil equivalent, 57% of which are liquids. The company operates refineries with a capacity of 1.9 million barrels of oil per day. – Warrior Trading News

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Author: Mark P