Posts Tagged ‘BP’

There are two main differences between Royal Dutch Shell and BP.

By Damian Reece, Head of Business 11:17PM GMT 02 Feb 2012

February 02, 2012, 1:20 PM EST

By Eduard Gismatullin

Feb. 2 (Bloomberg) — Royal Dutch Shell Plc, Europe’s largest oil company, is losing about $1 billion a year from drilling delays in the Gulf of Mexico since the 2010 Macondo disaster.

Shell’s production in the region will be curbed by about 50,000 barrels of oil equivalent this year, similar to 2011, Chief Financial Officer Simon Henry said. The company expects to return to planned operations off the Gulf coast by 2014.

“The cash flow implications are a billion dollars or more per year relative to where we want to be,” Henry said in London today. “We are catching up.”

The company, which in March said it planned to raise output to 3.5 million barrels of oil equivalent a day in 2012, is now warning that production could be lower due to Gulf drilling delays, asset sales and oil and gas prices in the U.S.

The U.S. Interior Department issued new safety regulations after lifting the drilling moratorium in October 2010 put in place after BP Plc’s Macondo well exploded in April the same year. The blowout, which killed 11 and sank the drilling rig, led to hundreds of lawsuits against BP and its partners and contractors.

–Editors: Stephen Cunningham, Randall Hackley.

To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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• Terry Macalister
• guardian.co.uk, Thursday 2 February 2012 17.44 GMT

Shell has been accused of “moral bankruptcy” by unions after unveiling a 54% rise in full-year profits less than a month after shutting its final salary pension scheme to new employees in Britain.

The oil company reported global annual earnings of $28.6bn (£18bn) – more than £2m an hour – while paying out $10.5bn to shareholders during 2011 and promising to raise dividend levels further in the coming months.

Peter Voser, Shell’s chief executive, said “there is more [good profit] to come” as he outlined a new programme of increased global investment as well as cuts that he said would provide even better returns for investors.

“We have worked hard to generate a strong pipeline of investment opportunities for Shell … All of this is supported by efficiency gains from our continuous improvement programmes,” Voser said.

But Europe’s largest oil group was attacked for displaying “predatory capitalism” by Len McCluskey, leader of the Unite union. “Shell reminds us of the moral bankruptcy of the corporate elite. The company is needlessly closing its final salary scheme while posting colossal profits,” he said. “Rather than provide security to its future staff and still make a profit, it has chosen greed. Shell is not alone: Unilever is needlessly slashing its employees’ pension benefits when there is no financial reason for doing so.”

Shell, which has also upset staff by unveiling plans to shut its major research and development centre at Stanlow in Cheshire after disposing of its refinery there, said it was surprised by the attack.

A spokesman pointed out that most government and private pension schemes paid in Britain were supported by Shell, which provides 12% of all dividends from the FTSE 100 index of leading firms.

The Anglo-Dutch group is riding high on the back of surging oil prices – which were more than $30 per barrel higher last year than in 2010 – and booming demand for gas, but says it is making most of its money outside Britain and makes barely 1p per litre out of petrol sales.

Voser pointed out that two thirds of the UK pump price went straight to the government as tax. He blamed near record prices for forecourt diesel on global crude market conditions and said Shell’s UK retail operations continued to come under “very heavy competitive pressures”.

Shell would continue to invest in the North Sea in oil projects such as those it has west of Shetland, but said there was a need for the right “tax structures to keep the oil and gas industry alive here”.

The company was doing “our bit for balancing the books” of the Treasury through paying a heavy tax burden, it said, while denying that its recent sale of the Stanlow refinery to an Indian group had any impact on the wider refining and distribution problems that have recently hit the south-east of England.

Shares in Shell rose 11% last year while arch-rivals such as BP saw no growth at all but on Thursday the Anglo-Dutch group’s stock market valuation fell slightly as the City was disappointed by the financial performance in the last quarter of the year.

Shell reported three-monthly earnings of $6.5bn, which was up on the same period last year but down quite heavily on the third quarter.

Total oil and gas production in the fourth quarter was lower, at 3.3m barrels of oil equivalent per day compared with 3.49m barrels a year ago. Shell said it would increase annual production to 3.7m barrels by 2014, helped by a $100bn investment plan which started in 2010.

The company said it would put much of its drilling efforts into the US and it now claims to have become the biggest driller – but not producer – in the deepwater Gulf of Mexico where BP used to reign supreme. Since the government moratorium on drilling in the Gulf, imposed following BP’s Deepwater Horizon spill, was lifted, Shell has obtained permission to drill five wells during 2012.

The company said it was treading carefully, meanwhile, in the Middle East in the wake of the Arab spring, but hopes to reveal soon how its exploration programme has been going in Saudi Arabia and when it plans to get back to similar work in Libya.

Shale hopes

Shell is hoping to turn the “shale gas revolution” sweeping north America into an export earner but also expects to see the controversial new energy source taking off in Europe once an “emotional” debate dies down.

The Anglo Dutch oil company is looking at possible plans to ship surplus quantities of the fuel, as liquefied natural gas or “gas-to-liquid” processed fuel, from the US.

Natural gas prices in north America have fallen to a 10-year low due to the discovery that gas can be extracted from shale rock using a technique known as hydraulic fracturing or “fracking”. It uses an assortment of chemicals to release gas with tiny explosions and has upset environmentalists and some politicians.

Peter Voser, chief executive of Shell, said $6bn would be spent worldwide on different kinds of shale gas operation, half of this in the US. The heavily populated nature of Europe versus the US made it more difficult to “frack” this side of the Atlantic, Voser conceded, but he said governments should “not take fast and emotional decisions” to restrict shale extraction. Shell expects Poland and even Germany to proceed with shale gas exploitation but it is also looking at operations in Ukraine and China.

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By Eduard Gismatullin – Feb 2, 2012 8:02 AM GMT

Royal Dutch Shell Plc (RDSA), Europe’s biggest oil company, expects to raise its dividend this year for the first time since 2009 as new projects generate more cash.

Shell plans net capital investment of $30 billion, with cashflow from operations in 2012-2015 expected to be as much as 50 percent higher than in the 2008 to 2011 period.

Chief Executive Officer Peter Voser said growth will be driven by more than 60 new projects, unlocking potential resources of more than 20 billion barrels of oil equivalent. That’s on top of 14 projects started in 2009-11, including Qatar’s Pearl gas-to-liquids venture.

“Our improving financial position creates an opportunity to increase both our dividends and investment levels,” Voser said today in a statement.

Net income fell to $6.5 billion in the fourth quarter from $6.79 billion a year earlier, The Hague-based Shell said. Excluding one-time items and inventory changes, profit missed analyst estimates.

Shell is the first of Europe’s biggest oil companies to report earnings. It will be followed by BP Plc on Feb. 7 and Total SA on Feb. 10. Exxon Mobil Corp., the world’s largest energy company by market value, reported fourth-quarter sales that fell short of analysts’ estimates earlier this week.

Shell posted adjusted earnings of $4.8 billion, compared with the $5.2 billion median estimate of 15 analysts surveyed by Bloomberg.

‘Substantial Undershoot’

“The overall result represents a substantial undershoot against a consensus which just three weeks ago was above $7 billion,” said Stuart Joyner, an analyst at Investec Bank Plc.

U.K. front-month natural gas prices are down about 20 percent since reaching a 2011 high of 67.80 pence per therm on Nov. 7. Milder weather in Europe and maintenance curbed Shell’s production by about 100,000 barrels of oil equivalent in the quarter, according to Sanford C. Bernstein & Co.

Shell will increase production to about 4 million barrels of oil equivalent a day in 2017-2018. Last March, it said daily output would rise to 3.5 million barrels this year and 3.7 million barrels by 2014.

Output fell 5.5 percent to 3.305 million barrels a day in the fourth quarter from the year-earlier period.

Profit was also curbed by maintenance at rigs in the Gulf of Mexico and the North Sea. Shell shut the Bonga field in Nigeria after an offshore oil spill, the nation’s worst in more than a decade. A fire disrupted shipments from Shell’s Pulau Bukom plant in Singapore, the company’s biggest.

Shell made a loss of $278 million from its refining and marketing operations, compared with a profit of $482 million a year earlier. Crude-processing fell 17 percent as sales dropped.

Refining margins from processing oil into fuels such as gasoline and diesel on the U.S. Gulf coast fell 22 percent to $7.16 a barrel in the fourth quarter from a year earlier, according to BP Plc data.

Of the 31 analysts that cover Shell, 21 recommend buying the shares, nine have ‘hold’ ratings, and one advises investors to sell the stock.

Shell plans to increase the dividend by 2.4 percent to 43 cents in the first quarter from 42 cents announced in the fourth quarter.

To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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Shell may even go as far as paying a special dividend or buying back shares to maximize shareholder value, according to analysts at Citigroup Inc.

Published on Sunday 29 January 2012 00:00

HIGHER annual and quarterly profits from oil heavyweight Royal Dutch Shell are this week expected to ignite the fury of hard-pressed drivers who continue to face near record prices at the petrol pump.

But the figures are likely to spell good news for investors as analysts raise the prospect that Shell, which boasts one of the largest dividends on the FTSE, may recommend an increase in the pay-out.

Although both full-year and quarterly numbers will be released, the City will focus on profits for the last three months of 2011, which are expected to be about 20 per cent higher compared to the same period in 2010.

However, analysts forecast they will be roughly 27 per cent below the third quarter as oil prices remained relatively flat over the final three months of 2011. That followed steep price gains earlier in the year driven by the political turmoil in the Middle East and North Africa.

The City spotlight on Thursday will also be on whether Shell confirms progress in getting American regulatory permits to explore an eventual potential oil bonanza off the Alaskan coast.

Jason Kenney, oil analyst with Santander, said: “Shell is a cash machine, but not really a growth entity. The ambitions [for Alaska] are still there, however.

“It [Alaska] will be a big exploration opportunity when it gets the full go‑ahead, with identified targets [for oil exploration].”

Analysts at broker Charles Stanley believe Shell “should have room to increase the [Q4] dividend”. It cites cash flow of $45 billion (£28.6bn) generated in 2011 compared to capital spending of $27bn and dividends of $10bn in the first three quarters. The broker forecasts rival BP, which reports the following week, will peg its fourth-quarter dividend at seven cents.

Santander forecasts an underlying profit at Shell, on a current cost of supplies basis, of $4.9bn, up from $4.1bn in the same quarter of 2010.

For the full year, the bank’s broking arm expects profits will have gone up to $24.7bn from $18.6bn in the previous 12 months.

While Shell’s exploration and production division is expected to have boosted profits to more than $5bn in the final three months of its financial year, up 52 per cent, it is thought the downstream – refining and marketing – arm may have fallen to a loss of between $180m and $210m.

Refining and petrochemical margins have been under pressure throughout the whole energy industry, partly on lower chemical volumes and the weakness of the euro.

BP, which reports on 7 February, is also seen as having boosted earnings as it continues to put the Gulf of Mexico oil disaster behind it.

Charles Stanley forecasts that BP’s fourth-quarter profits will have jumped 22 per cent to $2.2bn.

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The world’s largest oil companies like Exxon Mobil Corp. and Royal Dutch Shell Plc face a dilemma: whether the potential of a virgin basin outweighs the risk of a worsening international dispute.

January 25, 2012, 7:20 AM EST

By Brian Swint

Jan. 19 (Bloomberg) — Thirty years after Margaret Thatcher fought a 74-day war with Argentina over the Falkland Islands, the prospect of an oil boom is reviving tensions.

Oil explorers are targeting 8.3 billion barrels in the waters around the islands this year, three times the U.K.’s reserves. Borders & Southern Petroleum Plc will drill the Stebbing prospect next month, one of three Falkland wells that Morgan Stanley ranks among the world’s top 15 offshore prospects this year. Meanwhile, Rockhopper Exploration Plc is seeking $2 billion from a larger oil company to develop the Sea Lion field, the islands’ first economically viable oil find.

“The area is underexplored and highly prospective,” said New York-based Morgan Stanley analyst Evan Calio. “These could be like the high-impact wells in Ghana and Brazil a few years ago that opened up a whole host of basins.”

A major drilling success will further raise the political temperature as Argentina maintains its claim over the U.K’s South Atlantic territory, 300 miles (483 kilometers) from the Latin American coast. President Cristina Fernandez de Kirchner said Britain is taking her country’s resources, while Thatcher’s successor David Cameron yesterday accused Argentina of a “colonialist” attitude that didn’t account for islanders’ rights.

Cameron has approved contingency plans to bolster U.K. troops on the islands, and Prince William, a search and rescue pilot and the second in line to the British throne, may spend six weeks there this year, the Times of London reported today.

Not Negotiable

“We want to have a full and productive relationship with Argentina,” said Foreign Office spokeswoman Sophie Benger in an e-mailed response to questions. “Whilst the sovereignty of the Falklands is not up for negotiation, there is still much we can do together.”

The world’s largest oil companies like Exxon Mobil Corp. and Royal Dutch Shell Plc face a dilemma: whether the potential of a virgin basin outweighs the risk of a worsening international dispute. While producers with interests in Argentina, such as BP Plc, may be put off, others will want to participate, said Tim Bushell, chief executive officer of Falkland Oil & Gas Ltd., who’s looking for drilling partners.

“Big oil companies are used to dealing with political risks, and bigger ones than some saber rattling by Argentina,” Bushell said in a telephone interview, declining to name the companies he’s talking to. “For every BP, there are other major companies that don’t have an interest in Argentina.”

Shares Rise

Falkland Oil & Gas rose as much as 5.8 percent in London and traded at 49.25 pence as of 1:07 p.m. Rockhopper climbed 4 percent to 329.25 pence.

The Falkland Island government, which manages the territory’s mineral rights for the 2,955 islanders, says the big producers are interested and talking to the companies already active in the region. Of the five U.K.-based explorers that have drilled or plan wells, the largest, Rockhopper, has a market value of 899 million pounds ($1.4 billion).

“The Falklands is at a stage where a big company can take a large share in what could be a big oil province,” said Stephen Luxton, the Falkland Islands’ director of mineral resources. “There is an active program of marketing by the companies here. There are discussions going on, though we can’t name names.”

Falkland Oil & Gas plans to drill the Loligo prospect later this year, a well targeting 4.7 billion barrels of oil. Named after a Patagonian squid, it’s the second-most prospective well planned worldwide this year after one in Namibia, according to Morgan Stanley. The company’s Darwin prospect will follow and ranks sixth on the U.S. bank’s list.

Darwin, Stebbing

Borders & Southern will start drilling the Darwin prospect by the end of January, which seismic surveys suggest may hold as much as 760 million barrels of oil and 3 trillion cubic feet of gas. Stebbing, the target of the company’s second well, may hold as much as 1.2 billion barrels.

Together, the four wells planned for the Falklands this year are searching for about 8.3 billion barrels of oil. The Jubilee field, which was discovered in 2007, propelled Ghana into one of the world’s top 50 oil states. Brazil’s Lula field, drilled in 2006, holds an estimated 6.5 billion barrels of oil equivalent.

“There could be significant volumes down there and it would open up a new hydrocarbon province,” Borders & Southern CEO Howard Obee said in an interview. If the first two wells are successful, “we’d like to do a big drilling program, not only to appraise what we’d find but also drill up additional prospects. To do that, we’d need quite a bit of money.”

Selling Stakes

While the company will probably be able to sell more shares to determine the size of a discovery in this campaign, it may have to sell stakes in prospects to develop them, said Tracy Mackenzie, an analyst at broker Brewin Dolphin in Edinburgh. Borders & Southern holds a 100 percent interest in its fields.

Rockhopper says its Sea Lion discovery, made in 2010 and which may have more than 400 million barrels of recoverable oil, is commercial and will be developed. Chairman Pierre Jungels said last month that the company is showing drilling data to potential partners. The company this month ended a 10-well campaign that lasted two years. It has $100 million in cash after raising 46.5 million pounds ($72 million) in a share placing in October.

That’s just a fraction of the $2 billion the company reckons it will need to get the oil to market. Developers will have to build a floating production and storage unit to load the crude onto tankers. Cairn Energy Plc, Premier Oil Plc and Noble Corp. may be interested in investing, Bank of America Corp. analyst Alejandro Demichelis wrote in a Jan. 16 note.

Colorful Penguins

Spokesmen for BP, Shell, Premier and Cairn declined to comment on whether they’re interested in investing in the Falklands. Exxon and Noble Energy didn’t respond to e-mailed requests for comment.

All the supplies will probably have to come from Europe, about 8,000 miles away. The Falklands consist of two large islands and more than 700 smaller ones, home to the colorful penguins that give Rockhopper its name.

Argentina maintains that its sovereignty over the islands was interrupted in 1833, when British forces occupied the Malvinas Islands, expelling the Argentine population, an act to which the people and government of Argentina never consented. Thatcher sent a task force to retake the islands after Argentina’s military dictatorship invaded the territory on April 2, 1982.

Risk of Failure

Earlier drilling campaigns show the risk of failure in unproven oil provinces. Shell drilled on the northern side of the islands in the 1990s and found traces of oil before abandoning the prospect in 1998 as crude prices fell to around $10 a barrel. Interest in the region revived as oil prices rose higher than $100 a barrel, though Shell had disposed of its acreage.

Desire Petroleum Plc, which has licenses adjacent to Rockhopper’s, drilled six dry wells in a failed campaign that ended in April. Argos Resources Ltd., which also holds licenses in the region, decided not to use a rig after Rockhopper because it couldn’t raise enough money.

The global financial crisis has made it harder for oil explorers to borrow from banks and kept a lid on the amount companies can raise on the market. The oil and gas index of London’s Alternative Investment Market, where all five Falkland explorers are listed, fell 35 percent last year.

That leaves larger companies as the most likely sponsors in the region, and the government said some of them are already involved in talks.

“The majors are always going to be interested when a new basin comes on the map,” Morgan Stanley’s Calio said.

–Editors: Will Kennedy, Stephen Cunningham.

To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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JANUARY 23, 2012

By LIAM DENNING

Even today, $1.67 trillion is a lot of money. That is the amount wiped off the combined market capitalization of the top 50 energy companies between the end of 2007 and the end of 2011. Breaking it down offers big clues on Big Oil’s prospects for 2012.

Every year, PFC Energy, a Washington, D.C.-based consultancy, ranks the top 50 listed energy companies in the world by market value. The latest, due Monday, has a surprise. The biggest gainers in 2011 were the dinosaurs of oil and gas: the supermajors. Their collective value increased by 8%, compared with a 7% decline for the PFC Energy 50 overall. It is only the second time they have led the field in the ranking’s 13-year history.

Conventional wisdom holds this shouldn’t be the case. Faith in the supermajors—Exxon Mobil, Chevron, Royal Dutch Shell, BP, ConocoPhillips and Total—has waned as state-backed rivals like PetroChina have emerged and smaller competitors have opened up new frontiers like U.S. shale. Seemingly too big to grow but too small to offset the power of petro-states, the supermajors have been priced for decline.

Why did investors fall in love with them again in 2011? First and foremost: security. The S&P 500 ended 2011 down slightly after wild swings. In choppy markets, scale and cash payouts provide comfort. And the supermajors, with a collective value of $1.2 trillion at year end, provide it in spades. The three U.S. ones alone paid out 9% of all S&P 500 dividends and buybacks in the year ended September 2011, according to data from Standard & Poor’s and Capital IQ.

So how about that missing $1.67 trillion? It is gone despite the average price of Brent crude being 53% higher in 2011 than in 2007 (and 13% higher than in 2008, year of the super-spike). About half of that market value was lost by listed state-controlled national oil companies, or NOCs, like PetroChina. State support has its advantages, but it also means NOCs serve two masters: markets and mandarins. That makes them riskier investments.

While the NOCs in the ranking lost 44% of their value between 2007 and 2011, the supermajors declined by just 22%.

But it isn’t just safety that helped the supermajors lead the charge in 2011. Chevron, Exxon and Shell likely all delivered cash flow per share growth of 30% in 2011, well ahead of the traditional growth stocks of the exploration and production sector, according to Credit Suisse.

Ed Westlake, analyst at Credit Suisse, says the oil majors are more sensitive to oil prices than many investors think. In part, that is because much of their global natural-gas production is sold at prices linked to oil, rather than at the depressed, de-linked levels that prevail in the U.S.

This year, the supermajors are forecast to make $67 billion in free cash flow, according to FactSet Research Systems. That is down slightly from 2011′s expectation but still equates to a healthy free cash flow yield of 5.6%.

Goldman Sachs points out, however, that unlike a year ago, supermajor stocks enter 2012 trading at a slight premium to their smaller integrated oil peers. That, coupled with the fact that 2011′s cash-flow surge is unlikely to be repeated, means some investors’ gains may be redeployed into other energy stocks.

It seems unlikely that the supermajors will register the biggest gains in the PFC Energy 50 2012. That doesn’t make them a bad investment. With markets still unsettled—Europe, in particular, remains unpredictable—Big Oil will likely remain a safe haven. Stocks don’t always have to be the biggest winners to be reliable repositories of value.

Write to Liam Denning at liam.denning@wsj.com

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Hundreds of scientists to be relocated as oil multinational aims to shift most research and development work to Germany by 2014…

Shell staff told the Guardian privately that they were “seething”…

Terry Macalister: guardian.co.uk, Sunday 15 January 2012 15.12 GMT

Shell, led by Peter Voser, is to close its technology centre in Thornton, Cheshire. Photograph: Guido Benschop/AFP/Getty Images