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Up and down for BP in 2008 Alaska revenues and taxes rise while profits and production fall Eric Lidji Petroleum News
BP Exploration (Alaska) Inc. earned $1.95 billion last year, down 21 percent from 2007 even as revenues increased 15 percent, the result of a progressive production tax paired against record high oil prices and declining production from aging North Slope oil fields.
In year-end financial documents filed with the U.S. Securities and Exchange Commission on March 4, the Alaska subsidiary of London energy giant BP P.l.c. reported total annual revenues of $7.76 billion in 2008, up from $6.59 billion in 2007 and $6 billion in 2006.
The company reported net profits of some $2.5 billion in 2007 and $2.4 billion in 2006.
BP paid $3.3 billion in taxes in Alaska last year, a 36 percent increase from the roughly $2.1 billion paid in 2007. The company paid nearly $1.7 billion in total taxes in 2006. Of the total taxes the company paid last year, some 71 percent, or $2.3 billion, came in the form of production taxes, up from about $1 billion in 2007 and $665 million in 2006.
The consecutive annual jumps can likely both be traced to a revised production tax code pushed by the governor and passed by lawmakers in late 2007, but for different reasons.
The jump between 2006 and 2007 is most likely a result of an increase to the basic tax rate on profits from producing oil, while the doubling between 2007 and 2008 most likely came from a progressive feature that increases the tax rate as the price of oil increases.
ConocoPhillips recently reported similar increases in Alaska production taxes.
Oil price critical factor If oil prices stay below $50 a barrel through the rest of the year, it stands to reason the tax payments of BP and ConocoPhillips would drop significantly between 2008 and 2009.
The delivered price of Alaska North Slope crude oil stayed above $90 a barrel for most of 2008 before dropping to a low of $26 a barrel. It is currently around $48.50 per barrel. BP reported an average delivered price of $98.86 per barrel for Alaska North Slope crude oil in 2008, up from $71.68 per barrel in 2007 and $63.57 per barrel in 2006.
The profit and taxation figures BP is now reporting for 2007 and 2006 don’t match the figures the company reported at the time, showing a larger profit and smaller tax burden.
BP shifted $26 million in 2007 taxes and $238 million in 2006 taxes from BP Exploration (Alaska) to “Other subsidiaries,” a change made “to reflect the allocation of tax changes between BP Exploration (Alaska) Inc and other Alaskan subsidiaries in the BP group.”
Internationally, the BP Group earned $21.7 billion in net profits on $367 billion in total revenues, compared to $21.2 billion in profits on $291.4 billion in revenues in 2007.
ConocoPhillips, the leading oil and gas producer in Alaska, earned $2.3 billion in profit on $9.2 billion in revenue in Alaska in 2008 and paid $3.4 billion in non-income taxes.
Production declining BP Exploration (Alaska) produced 197,000 barrels of liquids per day on average in 2008, down 5.7 percent from 209,000 bpd in 2007 and down 12 percent from 224,000 in 2006.
The company saw a 2.7 percent production decline at Prudhoe Bay, a 3.6 percent decline at Milne Point, a 7.7 percent decline at Kuparuk and a 21.4 percent decline at Northstar.
BP produced 97,000 barrels of liquids per day in the Lower 48 last year, down 10 percent from 2007, and 244,000 bpd in the Gulf of Mexico, up 19.6 percent from 2007.
BP Exploration (Alaska) produced 41 million cubic feet of gas per day last year, down 25 percent from 55 million cubic feet per day in 2007 and 38.8 percent from 67 million cubic feet per day in 2006.
BP operates Prudhoe Bay and 12 other North Slope oil fields, and holds an interest in six other oil fields. The company owns several North Slope pipelines and the largest share of the trans-Alaska oil pipeline. The company employs some 2,000 people in Alaska.
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