THE BUSINESS (EU): Record profits over for oil's biggest three: “Royal Dutch/Shell is expected to post net income of $4.7bn (£2.4bn, €3.6bn) on Thursday, shy of the $5.2bn UK record it set at February's fourth-quarter results.” (ShellNews.net) 24/25 April 05
By Richard Orange
FIRST-QUARTER results from the big three oil companies this week will fail to match the record profits for the final three months of last year despite hikes in oil prices.
Royal Dutch/Shell is expected to post net income of $4.7bn (£2.4bn, €3.6bn) on Thursday, shy of the $5.2bn UK record it set at February's fourth-quarter results.
Exxon-Mobil will the same day miss the $8.4bn US quarterly record it achieved at the end of last year, with analysts expecting profits of $7.6bn.
The fall comes despite an average oil price of $47.7 over the period, $3.4 higher than in the final three months of 2004.
Jonathan Wright at Citigroup said: "The sector is finding it increasingly difficult to put through the higher oil prices. We expect the companies to deliver little more in a $48-per-barrel world than they did when the oil price was $10 lower."
Even so, the results will still be a healthy increase on the same period last year, when Shell reported profits of $3.5bn and Exxon Mobil profits of $5.4bn. BP is expected to report net income of $4.3bn, up from $3.5bn in the period last year but down on last quarter's $4.7bn.
The three companies gain less extra profits from rises in the oil price than oil firms centred on the US, UK and Norway, such as Statoil or the US majors, because they have more oil production in the Middle East, Russia and other countries where the government takes a greater share of profits from oil production when prices are higher. This, combined with rising operational costs, will dull the effect of higher oil prices.
The expected fall in quarterly profits reflects weakening margins in their oil refining and petrol station businesses, as indicated in trading statements from BP, ConocoPhillips and ChevronTexaco.
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