|
Larger revenues, higher taxes for BP Company paid $1.3B State of Alaska taxes through first half of 2008, still increasing profits year over year on higher oil prices Eric Lidji Petroleum News
Although record oil prices helped BP Exploration (Alaska) Inc. increase revenues by two-thirds between last year and this year, the company saw its tax burden jump more than $1 billion during the same time, according to financial filings released Aug. 1.
The Alaska subsidiary of the London-based oil giant earned around $1.5 billion in profits on nearly $4.8 billion in total revenues through the first six months of the year. By comparison, the company earned more than $1.1 billion in profits on nearly $2.9 billion in total revenues over the same period last year.
In other words, while the company has seen revenues increase 67 percent year-over-year to date, after-tax profits have increased just 30 percent over the same time period.
Although BP Exploration (Alaska) has seen higher operating costs so far this year, the discrepancy can mostly be attributed to a revision of state production taxes enacted by Gov. Sarah Palin and state lawmakers this past autumn.
“The biggest hit we’ve had is in Alaska, which is probably running at around $500 million of markup per quarter,” Andy Inglis, chief executive of exploration and production for BP, said about production taxes during an earnings call on July 29.
BP Exploration (Alaska) paid more than $1.3 billion in production taxes through the first six months of this year. By comparison, the company paid around $270 million in state taxes over the same period last year.
BP hit four ways on new tax The dramatic increase in state taxes this year, more than 480 percent, comes from several converging elements of the revised tax code.
In addition to upping the basic tax rate on oil production in the state, the Palin administration and state lawmakers also increased a surcharge tied to the price of oil, added retroactive elements going back to July 1, 2007, and capped deductions for certain expenses at the BP-operated Prudhoe Bay oil field.
During legislative deliberations last year, BP and other major oil companies argued against increasing the tax, saying it would make Alaska unattractive for investment.
In January, BP Exploration (Alaska) announced an $800 million capital budget this year, a 17 percent increase from the 2007 capital budget for Alaska, but less than the company claimed it had planned to spend before the tax changes.
BP has initiated several capital projects in Alaska this year, including efforts to advance the Western Region Development Program at Prudhoe Bay and restart the shut-in Badami oil field. The company also sanctioned the multi-billion-dollar offshore Liberty prospect, which sits in federal waters and is not subject to state production taxes.
Although the leading oil producers in Alaska dislike the new tax, several smaller oil companies working in the state have credited the revision with paying for as much as 35 percent of exploration expenses like seismic surveys and well costs.
| 