Oil prices have climbed to $75 a barrel, the highest for four years, in recent days on the back of geopolitical risks, strong demand and production restrictions.
The theory that America’s fracking boom has changed the economics of energy looks to have been premature. High prices may be unwelcome for industry and motorists but are a boon to big oil which is having a stonking first quarter.
Britain’s flagship oil major BP reported a striking 71 per cent rise in first quarter profits boosted by an average oil price of $67 a barrel and the opening of seven fields stretching from Oman to Trinidad.
There are now even hints of a dividend increase which would be pleasing to every pension fund in the country.
Over a decade the Deepwater Horizon explosion in the Gulf of Mexico will have cost BP a hefty $65bn making it the most costly event in corporate history
The return to form for BP comes at an important moment. For the first time in a generation the firm has got an oilman as a chairman in the shape of former Statoil chief Helge Lund.
Previously at the helm of BG when it was bought by Shell, he once made £15million for a few months’ work. We trust he will bring Norwegian modesty rather than FTSE 100 excess to the BP boardroom.
The changing of the guard at BP comes at a good moment. The latest results contain a Deepwater Horizon surprise with a further £1.2billion of compensation costs, with a full year bill of £2.2billion.
But the gift of the Obama Administration and the Louisiana courts to the people of Britain is drawing to a close. BP forecasts that compensation will fall to £1.5billion in 2019 and £700million in 2020.
Over a decade the explosion in the Gulf of Mexico will have cost BP a hefty £48billion, making it the most costly event in corporate history.
It is to the credit of chief executive Bob Dudley that he was able to steer the group from looming bankruptcy back to safety, exploration expansion and profits.
It has been a tough haul which has left BP with debts of £29billion and gearing of 28.1 per cent. The current oil price gusher should bring that down quite quickly.
One of Lund’s jobs will be to start thinking about a succession plan to follow Dudley. He might also want to consider whether BP’s heavy involvement in Russia is sensible in the current frosty atmosphere.
BP’s key investment is the minority interest in Rosneft which produced £181m of profit in the first quarter.
As critical is the access which this grants BP to Russia’s vast reserves of energy, much of it in the Arctic.
Followers of the Scandi TV series Occupation will know there is no love lost between Oslo and Moscow.
Lund has some big decisions ahead.
The Mike Coupe and Roger Burnley roadshow moved to Leeds as respective chief executives of Sainsbury’s and Asda sought to convince workforces that the merger of the two groups can only be a force for good.
The challenges ahead are underlined by the latest Kantar data showing market leader Tesco is running away with things, Bradford-based Morrisons is on a roll and enthusiasm for German incomers Aldi and Lidl is alive and well.
In embracing the deal, Coupe and colleagues need to be careful of loose lip syndrome. Melrose learnt to its cost during its triumphal pursuit of GKN that promises made during the course of a takeover battle become legally binding in the post Kraft-Cadbury world.
Pledges by Sainsbury’s so far are a 10 per cent cut in prices of everyday goods, no store closures by the merger partners and Asda’s Leeds headquarters will be kept intact.
All of these promises will have to be included in merger documents and under the rules of the City referee, the Takeover Panel, become legally enforceable.
Good luck with that.
Conviction of Autonomy finance chief Sushovan Hussain on 16 counts of wire and securities fraud after being accused in a San Francisco court of designing a Ponzi scheme to fool Hewlett-Packard is a big victory for HP boss Meg Whitman.
Claims by Hussain’s legal team of a US stitch-up do not look well supported given the help provided to US prosecutors by the Serious Fraud Office and audit watchdog the Financial Reporting Council.
The outcome is an unhelpful preview to the civil damages case brought by HP against Autonomy chief executive Mike Lynch and Hussain, due to be heard in the UK next year.