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SHELL SURGES BUT BP FAILS TO CASH IN ON OIL PRICES

Sunday April 24,2011
By Tracey Boles

A DIP in production is expected to stop BP reaping the full benefit of the high oil price in its first-quarter results, out this week.

But arch-rival Royal Dutch Shell is forecast to enjoy a surge in first-quarter earnings on the back of the oil price which averaged $105 (£64) per barrel in the three-month period.

First-quarter profits at crisis-hit BP are expected to be broadly flat at $5.6 billion (£3.4 billion).

Analysts at Charles Stanley said: “Production volumes could be some 7 per cent lower and as a result, BP will have less leverage from higher oil prices which are some 32 per cent higher than a year ago.”

Shell’s earnings are expected to have risen about 20 per cent year-on-year to $5.9 billion (£3.6 billion). Charles Stanley’s analysts said: “Brent oil prices have averaged $105 per barrel compared with $76 per barrel a year ago, and this will have the largest impact on the bottom line.” They added: “After disappointing Q4 results, the 2011 first-quarter results will be quite an important staging post to see how Shell is performing financially against its growth plans.”

Within a year, Shell will produce more gas than oil according to the outgoing chairman of its UK operation, James Smith.

In the wake of the disastrous spill in the Gulf of Mexico a year ago, BP’s chief executive Bob Dudley is pursuing a strategy of forging alliances with national partners. BP is attempting a strategic alliance and share swap with Rosneft, the Russian state-owned oil giant.

But the transaction has been blocked by BP’s Russian partners in another venture in the country, TNK-BP, which claims the deal is in breach of its shareholders’ agreement.

A deadline for completing the share swap has been extended to May 16 in the hope that arbitration can resolve the issues.

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