BP and Shell post big profits in era of record oil prices

BP and Shell post forecast-busting first quarter profits on back of record oil prices

Days of Noah

“But as the days of Noe were, so shall also the coming of the Son of man be.”
—Matt 24:37

”The earth also was corrupt before God,and the earth was filled with violence”.
—Gen 6:11

The combined profits of $17 billion reignited calls for a windfall tax on oil profits as consumers struggle to pay for food and fuel.

British Prime Minister Gordon Brown suggested that some of those profits should be reinvested in costly exploration for new oil reserves in the North Sea.

BP posted a 63 percent surge in first-quarter net profit to $7.6 billion (4.9 billion euros), while Shell reported a 25 percent rise, to a record $9.08 billion (5.81 billion euros).

Revenue at BP jumped 44 percent to $89.2 billion (57.1 billion euros), while sales at Shell soared 55 percent to $114 billion (72.95 billion euros).

Last week ConocoPhillips reported a 16 percent rise in net income to $4.14 billion. Like BP and Shell, the third biggest U.S. producer far outpaced industry expectations. More big profits are expected from the biggest two U.S. companies, Exxon Mobil Corp. and Chevron Corp., when they report first-quarter earnings later this week.

Crude oil hit $111.80 per barrel during the quarter, while gas jumped an average of 22 percent. Crude has pushed even higher since, reaching a record $119.93 per-barrel this week.

BP shares jumped 6 percent to 613 pence ($12.18), while Shell rose 4.5 percent to 25.83 euros ($40.39).

The enormous profit reports from European companies coincided with the end of a two-day refinery strike in Britain that shut off 700,000 barrels of oil per day, brought from the North Sea to a BP plant.

Truck drivers staged a protest in London’s Park Lane on Tuesday, blaring their horns to protest a 30 percent rise in the price of diesel over the past year. A similar protest took place in Washington, D.C. on Monday, and it wasn’t the first.

“The price of fuel is becoming something many families are struggling with,” said Sheila Ranger, a spokeswoman for the RAC Foundation, a commuter advocacy group. “This will be the last straw for some motorists.”

Shell’s Chief Financial Officer Peter Voser said oil companies are not to blame.

“We don’t understand the oil price at this stage,” he said. “The fundamentals will not justify an oil price as we see it at the moment.”

Shell’s earnings from oil production rose 52 percent to $5.14 billion (3.3 billion euros), due almost entirely to the price increases. The company said combined production of gas and oil equivalents increased by less than 1 percent to 3.4 million barrels per day, as a 9 percent rise in gas production outweighed a 6 percent fall in oil production.

Stripping out the impact of oil inventories that have risen in value, refining profits would have fallen 20 percent, Shell said.

“It seems that better marketing and trading were able to offset the weak refining environment,” analyst Alexandre Weinberg of Petercam.

Shell has invested heavily to improve production after a string of setbacks, including an accounting scandal in 2004. More recently, it has faced attacks on its pipelines in Nigeria and a forced sale of part of its stake in a major project on Russia’s Sakhalin Island to a state-run enterprise.

BP’s profit follows an even rougher period for the company from production outages, U.S. environmental fines and fraud and the scandal-tinged departure of its chief executive.

Chief Executive Tony Hayward, who took over from John Browne a year ago, has focused on bringing new production and refining capacity on line to improve earnings.

“At last, it appears that BP is beginning to improve its operational performance and this looks set to drive a stronger financial performance in the second half,” said Tony Shephard, analyst at Charles Stanley & Co.

BP’s closely watched replacement cost profit rose 48 percent to $6.59 billion (4.34 billion euros), compared with $4.44 billion in the first quarter of 2007. The replacement cost figure is viewed by many analysts as the best measure of an oil company’s underlying performance because it excludes changes in the value of crude inventories, measuring the amount it would cost to replace assets at current prices.

The company said refining availability improved for the sixth successive quarter.

“BP is still not firing on all cylinders but its operational turnaround looks to be on track with a strong second half recovery in prospect,” said Charles Stanley & Co. analyst Tony Shephard.

AP Business Writer Toby Sterling in Amsterdam contributed to this report.

  1. Linda, 30 April, 2008

    I hope they are quite pleased with themselves as they watch the news & see how their fist full of dollars that they have gathered up for themselves is causing families to lose their homes, family-owned businesses to go under, family dinner tables offering far more unhealthy carb than ever before, family vacations spent “in town”, family health insurance policies being cancelled in order to fill the gas tank, children not going on school field trips ‘cuz the school’s budget can’t cover the cost of the gas to get there, restaurants, etc. closing because there is no discressionary money to spend.
    But, congratulations to Shell & BP for a job well done in taking away the every-day person’s right to the persuit of happiness.

  2. Joy B., 01 May, 2008

    Linda,

    I’m sorry, but your finger pointing is way too simplistic. I do not claim that these companies wear halos. What I do contend is the increasingly lower standard of living in America is due to decades of mismanagement by your (our) government. In full disclosure, I am employed in the geological exploration end of the oil industry.

    First of all, oil prices are going through the roof as a result of the freefall of the American dollar. And what is our government’s response to this: print more money and continue to spend money like drunken’ sailors (no disrespect meant to drunken sailors).

    Much of the people that are losing their homes is due to the bubble created by the government by accelerating money loans (loans made possible to anyone with no money down) and then they threw the brakes on credit.

    But back to oil; I would like to point out a couple of things. First of all, the oil industry is limited to where it may drill in the U.S. The East and West coast and offshore Florida are off limits. In the Gulf, not only do companies pay to lease acreage and pay taxes, the government also receives a royalty (around 20%) from all oil and gas produced. This is why we have always wondered why the U.S. government has tried to kill this golden goose called the U.S. oil industry!

    In the 1980s, our government (under Reagan) had the Saudis flood the market with their oil, driving prices down less than $10 per barrel of oil. This wiped out 70% of the U.S. independant oil companies, with around 8,000 of them going out of business. These independant oil companies are truly the “oil finders in America”. There are no stats during this time of how many geologists, geophysicists, and petroleum engineers went to work for McDonalds or how many lost their homes. Some of these independants are pretty large and others are mere mom and pops. To explain their value (and America’s loss), the company I presently work for has the largest natural gas discovery onshore Texas in the past 20 years. At the time of this discovery, the company had a staff of 10 people.

    I am very sorry for the tough times people are going through. And I very saddened that people around the world are going to starve because we now put food in our tank. But, let us point the finger where the blame belongs for America’s demise.

    Joy

  3. jen-o, 02 May, 2008

    joy,

    i understand what you are saying…

    in fact, i have heard that there are untapped oil reserves (with vast quantities of oil) in our OWN country… and yet, our government would rather sell our souls to the saudis that to explore our own reserves…

    shalom,
    jen-o

  4. Joy B., 02 May, 2008

    jen,

    Since my stepdad is a petroleum engineer, I was taught growing up that oil is a commodity wars are fought over.

    Don’t you find it pretty interesting that God put all that oil in the Middle East. Think about – the Saudis actually have to import sand for construction purposes – their sand is too fine grained (would it be unchristianly of me to say this cracks me up). All they have is O-I-L!!!! I think God put the oil in the Middle East to see who would sell their soul to Ishmail’s descendants for it.

    Joy

  5. Dave Lucas, 04 May, 2008

    I think God put the oil in the Middle East to see who would sell their soul to Ishmail’s descendants for it.

    Nice post Joy. I hear almost universal criticism from Americans against VZ, Iran, OPEC in general…yet I never seem to hear many ask why the US is so dependent on others for oil. I guess ignorance truly is bliss. Until the oil runs out. I don’t think I’ve seen an accurate report on the mainstream news channels concerning the cause of high oil prices yet. For a primer, I suggest the documentary “Crude Awakening”

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