Setbacks: Unrest in the Niger Delta has hammered output
Saturday 21 July 2007
By Sam Fleming
THE soaring price of crude will be of cold comfort for investors in BP and Royal Dutch Shell as the terrible twins of the oil industry unveil further production declines next week.
They are likely to admit to further setbacks at their upstream divisions when they announce earnings on Tuesday and Thursday, despite a rebound in the price of Brent crude.
BP suffered the biggest volume decline of any European oil major in the second quarter, according to Citigroup estimates.
Problems in the Gulf of Mexico and rising costs will combine with outages across its fleet of American refineries to cast a pall over earnings, claimed analyst James Neale. Profit is predicted to drop 17pc to £2.5bn.
Shell will probably deliver an earnings lift to around £3.3bn because of a stronger refinery performance, but it will face harsh questioning over its Nigerian strategy as unrest in the Delta region hammers output. Jason Kenney of ING reckons while Shell’s profit performance will prove perkier, BP’s dismal earnings could provide I a better buying opportunity.
Both BP and Shell will face questioning over their Russian activities amid fears the diplomatic row with the Kremlin could spill into the commercial arena. BP chief executive, Tony Hayward will tell the City the stand-off has had no ill effects on its Russian interests.
Shell faces controversy as it prepares to charge into environmentally vulnerable Arctic regions in a quest for resources. Scientists say subsea noise from Shell’s Sakhalin 2 project is endangering Western Grey Whales. Activists also warn Shell plans to explore Alaska’s Bristol Bay will damage fishing grounds and the North Pacific ‘ Right Whales – the world’s most critically endangered population with a mere 300 left. “BP shares fell 5p to 600p. Shell dropped 23p to 2,060p.
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