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Exxon, Shell, BP Profit to Climb on $100 Oil; Refining Slumps

Bloomberg: Exxon, Shell, BP Profit to Climb on $100 Oil; Refining Slumps

By Fred Pals and Eduard Gismatullin

April 28 (Bloomberg) — Exxon Mobil Corp. and Royal Dutch Shell Plc may report record first-quarter profit and BP Plc the highest earnings in two years after oil rose above $100 a barrel and natural gas prices climbed.

Exxon Mobil probably will say net income rose 25 percent to $11.6 billion, based on the average of six analyst estimates compiled by Bloomberg. Profit at The Hague-based Shell likely gained 4.9 percent to $6.88 billion excluding one-time items, according to the median of eight analysts. BP’s probably jumped 32 percent to $5.26 billion, the median of eight analysts surveyed by Bloomberg News shows.

Oil reached $100 for the first time on Jan. 2 and $111.80 a barrel in March as the dollar fell, while natural gas increased 22 percent on average. Shares of all three fell as the rise in crude squeezed refining profits by outpacing gains in gasoline and as they faced rising competition from OAO Gazprom of Russia, PetroChina Co. and Petroleo Brasileiro SA, Brazil’s state- controlled oil company.

“It’s obviously all about the oil price,” said Edward Collins, a London-based money manager at New Star Asset Management Group Plc. He runs four funds as part of $41 billion of investments, including BP and Shell shares. “Refining margins were weak in the quarter, particularly in the U.S.”

Shell spokesman Wim van de Wiel said the company’s average analyst estimate is $6.77 billion. BP spokesman Toby Odone said that a survey of 22 analysts by the London-based producer gave a mean estimate of $5.27 billion. The forecasts exclude changes in oil-inventory values. Exxon Mobil, based in Irving, Texas, didn’t return calls seeking comment outside of normal business hours.

Share Performance

Exxon Mobil fell 9.7 percent in New York trading in the first quarter, while BP dropped 17 percent in London and Shell lost 18 percent in London. The MSCI World Index, a global stock- market benchmark, lost 9.5 percent. Both Shell and BP report tomorrow.

In terms of market value, Exxon Mobil is the world’s biggest oil company, at $495 billion. Beijing-based PetroChina, whose shares tumbled 30 percent in Hong Kong trading during the quarter, is next, at $438 billion, followed by Moscow-based Gazprom, at $313 billion and Rio De Janeiro-based Petrobras, at $250 billion. Shell comes next with a market value of $242 billion and BP is sixth-largest, at $217 billion. Gazprom fell 13 percent in the quarter and Petrobras lost 16 percent.

ConocoPhillips, the third-largest U.S. oil company, said April 24 first-quarter net income jumped 17 percent to $4.14 billion as rising crude and gas prices offset narrowing refining margins. Profits from making fuels dropped to $4.57 a barrel in the period from $9.41 a year earlier, according to BP.

Pursuit of Reserves

“Downstream was poor for the industry, particularly in the U.S.,” said Ivor Pether, who covers oil and mining in a team that oversees about $14 billion at Royal London Asset Management.

Exxon Mobil Chief Executive Officer Rex Tillerson expanded the company’s search for reserves to New Zealand, Brazil and the Arctic as North American fields age and contracts with host nations reduce its share of output as prices rise. About 20 percent of Exxon Mobil’s output is governed by such accords.

The company, which reports May 1, signed a 25-year extension last month to its agreement in Malaysia, where Exxon Mobil pumps 150,000 barrels of crude and 1.2 billion cubic feet of gas daily.

Total production in the period probably slid 4.4 percent to 4.24 million barrels of oil equivalent a day, said Erik Mielke, an analyst at Merrill Lynch & Co. in New York.

Lost Production

Shell CEO Jeroen van der Veer plans to counter lost production in Nigeria and Russia by mining Canadian oil sands and developing a Qatari gas-to-liquids venture. The company said April 21 that an attack on a Nigeria pipeline cut as much as 169,000 barrels a day of output. Attacks have halted more than 20 percent of exports from the country, the fifth-biggest supplier to the U.S.

Overall production was probably 3.37 million barrels a day, down 3.9 percent from a year ago, according to the average of three analyst estimates.

BP said in February that output will rise 13 percent during the next five years to about 4.3 million barrels a day. CEO Tony Hayward said the company will sustain production of at least 4 million barrels a day until 2020 “even with no new discoveries or access to new opportunities.”

The company may show production was little changed from the 3.91 million barrels a day pumped in the first quarter of 2007, according to the Bloomberg survey.

Hayward said April 17 earnings will rise in the second half when output starts at its Thunder Horse platform after a three- year delay and U.S. refineries are back online.

Its Texas City refinery, BP’s biggest in the country, started a crude distillation unit last month that had been shut since 2005, when a fatal explosion and a hurricane damaged the plant.

To contact the reporters on this story: Fred Pals in Amsterdam at [email protected]; Eduard Gismatullin in London at [email protected]

Last Updated: April 27, 2008 19:24 EDT

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