Royal Dutch Shell Plc  .com Rotating Header Image BP, Shell, Eni Results May Put European Oil-Stock Gains at Risk BP, Shell, Eni Results May Put European Oil-Stock Gains at Risk

“The company disclosed in January it overstated oil reserves for more than five years.”

July 26 (Bloomberg) — European energy stocks have been the region’s best performers during a three-month market slump, and earnings reports from BP Plc, Royal Dutch/Shell Group and Eni SpA this week may decide whether they maintain that position.

“We’re at a critical moment,” said Marcus Kueppers, who helps oversee about $1.9 billion at Oppenheim Asset Management in Cologne, Germany. “While the earnings are important, the outlooks are the best guide to where gains might be made.”

The Dow Jones Stoxx 600 Energy Index has risen 5.4 percent since March 4, when the benchmark Stoxx 50 and Stoxx 600 indexes reached this year’s highs, amid record prices for crude oil. The Stoxx 50 has dropped 7.3 percent and the Stoxx 600 has declined 5.8 percent.

BP, Royal Dutch/Shell and Eni, three of Europe’s four biggest oil producers, are among 16 companies in the Stoxx 50 that are scheduled to release second-quarter earnings this week. The total includes Royal Dutch Petroleum Co. and Shell Transport & Trading Co., the owners of the U.K.-Dutch group.

Banco Bilbao Vizcaya Argentaria SA, BT Group Plc, DaimlerChrysler AG, Deutsche Bank AG and GlaxoSmithKline Plc also report, as do HBOS Plc, Lloyds TSB Group Plc, Santander Central Hispano SA, Siemens AG, Telecom Italia SpA, Telefonica SA and Unilever.

The First Seven

Last week, the Stoxx 50 fell 0.3 percent and the Stoxx 600 dropped 0.7 percent. The Euro Stoxx 50, a measure for the 12 countries sharing the euro, declined 1.5 percent. The three benchmarks slid for the fifth successive week.

Companies that are most dependent on economic expansion for earnings growth have lagged on concern that higher energy costs, along with rising U.S. interest rates, will crimp spending. The Stoxx 600’s technology index has dropped 27 percent since March 4, and ranks last among the benchmark’s 18 industry groups.

Seven Stoxx 50 companies — Royal Philips Electronics NV, Nokia Oyj, Novartis AG, Roche Holding AG, Vodafone Group Plc, SAP AG and AstraZeneca Plc — have announced results for the latest quarter. Five exceeded estimates from analysts surveyed by Bloomberg, Vodafone was below estimates and SAP was in line.

Axa Investment Managers’ Franz Wenzel said he expects the week’s best earnings reports to come from energy producers. Oil prices have advanced 27 percent in 2004 and reached a record in New York of $42.33 a barrel on June 1.

Seeing Growth

“We will be following what happens this week,” said Wenzel, senior investment strategist for Axa in Paris, where he helps oversee $354 billion. “The earnings season is important in our assessment of strategy and industry selection.”

Analysts expect Stoxx 600 energy companies to boost earnings 16 percent this year, said Bobby Rakhit, associate director at JCF Group, a market-research firm, in London. The increase compares with a forecast for a 10 percent drop at the beginning of the year.

BP, the world’s second-largest publicly traded oil company, reports on Tuesday. In a July 2 update, the London-based company signaled second-quarter profit rose as oil and gas production jumped 17 percent because of a contribution from a $6.35 billion venture in Russia.

Profit may rise to $4.1 billion in the quarter from $3.12 billion a year ago, Deutsche Bank estimates. The shares have added 0.8 percent this quarter and 7.7 percent since March.

Leading the Quarter

Results from Royal Dutch/Shell, based in London and The Hague, follow on Thursday. Europe’s biggest oil company after BP will probably say profit after one-time items rose 22 percent to $3.93 billion, according to Deutsche Bank. The company disclosed in January it overstated oil reserves for more than five years.

Shell Transport & Trading Co., which owns 40 percent of Royal Dutch/Shell, has lost 3.8 percent in the quarter. Royal Dutch Petroleum Co., which owns the rest, has shed 1.5 percent.

Eni, the region’s No. 4 oil company, is also scheduled to report on Thursday. Its shares have risen 1.2 percent in the quarter for the third-largest advance in the Stoxx 50. Only Novartis SA and Roche Holding AG have bigger gains.

BP’s rise ranks fourth among index members. Total SA, the region’s third-largest oil company, has added 0.2 percent and ranks fifth. HBOS, the U.K.’s biggest mortgage lender, is the only other Stoxx 50 company to show a gain. Its share price is just 0.1 percent higher.

Thursday, July 29

BT Group Plc

DaimlerChrysler AG

Eni SpA

Royal Dutch/Shell Group

Santander Central Hispano SA

Siemens AG

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