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Reuters: US troubles put BP in laggard Shell’s shadow

Tue Aug 8, 2006

LONDON (Reuters) – BP Plc’s U.S. troubles have cost the oil giant its place as the world’s second-largest fully publicly-traded oil company, pushing it into the shadow of arch rival and industry laggard Royal Dutch Shell Plc.

London-based BP’s shares fell 1.2 percent to trade at 615-1/2 pence at 0834 GMT on Tuesday, adding to heavy losses on Monday after BP announced the shut-down of the U.S.’s largest oil field at Prudhoe Bay, Alaska, due to pipeline corrosion.

This gave BP a market capitalization of $232 billion compared to Shell’s $237 billion. Anglo-Dutch Shell’s London-traded A shares traded up 0.32 percent at 1,873 pence, helped by a positive research note from ING.

Previous Alaskan pipeline leaks, the delayed startup of a key U.S. oil platform and renewed fears about safety at BP’s U.S. refineries following criticism over an explosion that killed 15 people last year, and new accidents have weighed on BP’s shares in recent months.

The stock has underperformed Shell by around 10 percent since March 24, Citigroup said in a note on Monday.

It is a big turnaround for what had been Europe’s largest oil company.

Many analysts have long rated BP as Europe’s best run oil company, while Shell has struggled to rebuild investor confidence since a reserves overbooking scandal in 2004 and massive cost overruns on key projects last year.

“BP has given up a lot of its premium rating and we estimate the shares are now trading around parity with Shell on a 2007 P/E of 10.5 times,” Citigroup said.

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