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The Scotsman: Oil giants’ three-year profits boom over

THE WEEK AHEAD IN THE MARKETS
MARTIN FLANAGAN
 ([email protected])

OIL giants BP and Shell are expected to report a fall in underlying third-quarter earnings this week, ending a three-year boom of record earnings on the back of surging oil prices.

Analysts believe higher oil prices in the quarter will have failed to offset soaring oil field costs, higher taxes, a fall in refining profit margins and lower production.

BP is the first of the pair to report, tomorrow, with the City consensus being for a profit of $4.7 billion (£2.5bn) – down 12 per cent on the same quarter last year. However, because the group was hit with a $700 million charge for damage by Hurricane Rita in the third quarter of last year, the headline result is likely to be up year on year.

BP has already reported that production in the past three months fell even lower than a year ago, when it was disrupted by the hurricane season.

It said in a recent trading update that it pumped 24,000 barrels a day less between July and September than in the third quarter last year, after it was forced to shut operations at its large Prudhoe Bay oil field in Alaska over safety fears.

The company is also embroiled in an investigation into a fire at its Texas City refinery which killed 15 workers last year.

Royal Dutch Shell reports its Q3 figures on Thursday, with Barclays Stockbrokers forecasting a slight easing in third quarter profits to $5.5bn, down from $5.8bn last time.

The British-Dutch oil major’s production is expected to have dropped to 3.1 million barrels of oil equivalent per day compared with 3.3 million in the third quarter of last year, as ethnic fighting in Nigeria kept fields closed.

Analysts will also be looking for the latest in a flurry of negative updates on Shell’s stand-off with the Russian authorities on environmental concerns surrounding the Sakhalin-2 gas project.

This article: http://business.scotsman.com/index.cfm?id=1565472006

Last updated: 23-Oct-06 01:05 BST

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