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Earnings slide at BP and Royal Dutch Shell as oil giants slash spending

By LAURA CHESTERS FOR THE DAILY MAIL: 27 April 2015

Crude oil prices hit a 2015 high this month but it is not enough to prevent disastrous first quarter results from BP and Royal Dutch Shell this week.

The price of oil is still well below last summer’s highs of $115 a barrel at around $65 and BP and Shell will be forced into further cuts and sell-offs, experts have warned.

The two British oil giants have already cut spending for this year by up to 15 per cent.

BP is expected to reveal a 60 per cent drop in first quarter operating profit to £1.4billion, according to Société Générale.

Analysts also predict news of increasing costs and SocGen is estimating liabilities from the fatal Deepwater Horizon disaster to have increased from £308million in the fourth quarter to £362million.

BP chief executive Bob Dudley last week said he expected the oil price to remain low for the next few years. At a conference in Texas he warned the North Sea industry still has to face a ‘massive’ wave of restructuring.

Other analysts believe BP’s weak position leaves it vulnerable to a takeover.

Experts at Liberum said: ‘BP appears on the chess board as one of the few remaining sizeable potential targets for a large synergistic deal in a low price environment.’

US giant ExxonMobil is regarded as an obvious suitor. However BP has taken steps to shore up its defences and some City experts suggest its US liabilities make it unattractive.

Shell, which is in the process of buying BG Group in a £47billion deal, is expected to reveal that profit has more than halved to £1.6billion on Thursday, according to analysts at Bernstein.

SOURCE

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