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Citigroup predicts Shell production drop


By EDUARD GISMATULLIN Copyright 2009 Bloomberg News

June 29, 2009, 8:26AM

BP Plc, Europe’s second-biggest oil company, may post second-quarter earnings that are “more resilient” than bigger rival Royal Dutch Shell Plc because it’s less affected by weak demand for natural gas in Europe, Citigroup Inc. said.

Increased production from the Thunder Horse platform in the Gulf of Mexico may contribute toward an expected 3.1 percent gain in output for London-based BP compared with last year, Mark Bloomfield, an analyst at Citigroup, said today. Shell may report a 5.4 percent drop in production in the second quarter because of disruptions in Nigeria, he said.

Shell’s “higher exposure to gas seasonality than BP points to greater risk around both earnings and pricing,” London-based Bloomfield wrote in a note to clients. “This is exacerbated by an Asia-Pacific bias to liquefaction capacity where gas volumes are also likely to be weak.”

BP’s production will be higher this year compared with 2008 while overall financial results are “really quite strong,” Chief Executive Officer Tony Hayward said June 25. Shell’s Chief Financial Officer Peter Voser, who will take over as CEO from July, said in April lower gas demand would hurt earnings this year.

Production at BP may reach 3.949 million barrels of oil equivalent a day in the second quarter, Citigroup said. Shell’s output may drop to 2.956 million barrels a day in the period, it said.

Shell pumped 9.751 billion cubic feet of gas (1.681 million barrels of oil equivalent) a day in the first quarter, almost in line with crude oil and bitumen output of 1.714 million barrels a day.

The Hague-based Shell is raising the share of gas output in its portfolio and expanding liquefied gas projects as well, according to Voser.

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