Even $20.4 billion worth of write-offs linked to BP’s (BP) exit from Russia couldn’t obscure the strong first quarter enjoyed by the company.

The non-cash impairments principally linked to BP’s investment in Russian oil producer Rosneft may have been hefty but the UK oil company’s underlying net profit of $6.25 billion, up from $4.1 billion in the previous quarter, was its highest quarterly level in a decade. It was also considerably ahead of the $4.5 billion analyst consensus forecast.

The questions facing investors now are two-fold. How high are the risks of a windfall tax on BP’s bumper profit and cash flow and what do recent events mean for the company’s long-term transformation plan?

The answer to the first question is tricky as politicians can be unpredictable. What’s certain is the increase in household energy bills is unlikely to let up in the short term.

As such the argument that BP should share the pain with hard-pressed families, given the big increase in its profitability and cash generation is linked to a surge in commodity prices resulting from the war in Ukraine, is likely to remain a powerful one.

The Labour Party is arguing for a 10% bump in corporation tax for North Sea producers. Chancellor Rishi Sunak has moved from arguing this would hurt investment by the oil and gas sector to accepting it as a possible policy tool if investment isn’t forthcoming.

In this context it is no surprise to see BP chief executive Bernard Looney switch from his talk of the company being a ‘cash machine’ in 2021 to reveal it already expects to pay £1 billion in tax for 2022 North Sea profit and pledging to spend big to boost UK energy security.

Looney said his charge is ‘Backing Britain’ after outlining plans to invest £18 billion in the UK this decade on offshore wind, hydrogen, carbon capture and storage as well as electric vehicle charging infrastructure, retail outlets and North Sea oil and gas.

Where this sits with the company’s 2050 net zero pledge is open to question. It also may not escape the attention of the company’s critics that a further $2.5 billion was allocated to share buybacks.

The company’s ability to indulge in such generosity is underpinned by a drastic improvement in its balance sheet with net debt falling from more than $50 billion two years ago to just $27.5 billion.

Writing down the value of the Russian interests to almost zero is a prudent step but there are some suggestions BP might realise rather more than that as it looks to offload these assets. The Indian government has reportedly asked its state-run energy firms to consider buying Russian oil assets, of which BP’s 19.75% stake in Rosneft could be one.

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