Fri Oct 19, 2007 10:37 AM BST
By Tom Bergin
LONDON (Reuters) – Oil majors Royal Dutch Shell and BP are expected to report sharp falls in third-quarter profits in the coming week, despite record oil prices, due to lower production, tighter refining margins and higher costs.
A Reuters poll of 10 analysts gave an average forecast of $4.06 billion (1.98 billion pounds) for third-quarter replacement cost net profits at BP — a 10 percent drop compared to the same period last year.
Shell
The two measures of profit strip out the impact of changes in the value of inventories. Analysts also exclude one-off items such as asset sales from their forecasts as they believe this produces the best estimate of underlying business health.
The profit falls come in spite of Brent oil prices averaging $75 per barrel during the quarter — a record quarterly high.
However, the oil majors have not received the full benefit of higher oil prices because governments around the world are raising tax levels and tightening contract terms to keep more of the gains for themselves.
Lower production is also expected to weigh on earnings.
The analysts forecast that BP’s
Shell’s production of oil and gas is seen down 4.1 percent to 3.12 million boepd, partly for the same reasons but also because it lost a big stake in the giant Sakhalin-2 project in Russia earlier this year.
It will be the lowest quarterly production level at the Anglo-Dutch major in about a decade, Irene Himona at Exane BNP said.
Shell, the world’s second-largest non government-owned oil company by market value behind Exxon Mobil Corp, and BP, the third-largest, are expected to report that higher costs also ate into profits.
A pull-back in refining margins will add to the companies’ woes. Average global refining margins fell to $8.05 per barrel in the third quarter from $8.40 in the same period a year earlier, BP said.
OUTAGES
London-based BP’s refining and marketing division will also be hit by outages at some big U.S. refineries. Himona said all the division’s profit was likely to come from retailing fuel with the crude processing operation only breaking even.
Many analysts believe the quarter will represent the low point for BP, after project delays, pipeline leaks, a refinery explosion and probes into its trading weighed on investor sentiment and earnings in the past two and a half years.
However, Citigroup said Shell may yet again disappoint investors with an increase in near-term capital expenditure plans to $24-$25 billion a year from the $22-23 billion which the company forecast for 2007.
Analysts at Goldman Sachs predicted Shell’s 2008 capex may rise to $27.5-28 billion.
BP shares currently trade on a multiple of 11.06 times 2008 earnings, according to Reuters estimates, compared to 10.93 times for Shell, 10.54 times for France’s Total and 10.22 times for Italian oil major ENI.
Twenty-one analysts polled by Reuters rate BP shares a “buy” or “outperform” while four rate it a “sell” or “underperform”. Seventeen rate Shell a “buy” or “outperform” compared to three who see it as a “sell” or “underperform”.
© Reuters 2007. All rights reserved.
This website and sisters royaldutchshellplc.com, shellnazihistory.com, royaldutchshell.website, johndonovan.website, and shellnews.net, are owned by John Donovan. There is also a Wikipedia segment.
Royal Dutch Shell conspired directly with Hitler, financed the Nazi Party, was anti-Semitic and sold out its own Dutch Jewish employees to the Nazis. Shell had a close relationship with the Nazis during and after the reign of Sir Henri Deterding, an ardent Nazi, and the founder and decades long leader of the Royal Dutch Shell Group. His burial ceremony, which had all the trappings of a state funeral, was held at his private estate in Mecklenburg, Germany. The spectacle (photographs below) included a funeral procession led by a horse drawn funeral hearse with senior Nazis officials and senior Royal Dutch Shell directors in attendance, Nazi salutes at the graveside, swastika banners on display and wreaths and personal tributes from Adolf Hitler and Reichsmarschall, Hermann Goring. Deterding was an honored associate and supporter of Hitler and a personal friend of Goring.
Deterding was the guest of Hitler during a four day summit meeting at Berchtesgaden. Sir Henri and Hitler both had ambitions on Russian oil fields. Only an honored personal guest would be rewarded with a private four day meeting at Hitler’s mountain top retreat.
IN JULY 2007, MR BILL CAMPBELL (ABOVE, A RETIRED GROUP AUDITOR OF SHELL INTERNATIONAL SENT AN EMAIL TO EVERY UK MP AND MEMBER OF THE HOUSE OF LORDS: 
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A head-cut image of Alfred Donovan (now deceased) appears courtesy of The Wall Street Journal.
