BP and Shell post prof­its, warn on prices

The Myanmar Times - - Business -

BRI­TISH en­ergy gi­ant BP and its An­glo-Dutch ri­val Shell un­veiled up­beat quar­terly prof­its as both kept a tight rein on costs but warned over pre­vail­ing low oil prices.

BP’s un­der­ly­ing re­place­ment cost profit – the bench­mark in­dus­try mea­sure which ex­cludes ex­cep­tional items and oil price fluc­tu­a­tions – tum­bled 49 per­cent to US$933 mil­lion (851 mil­lion euros) in the three months to Septem­ber.

How­ever, that com­fort­ably beat ex­pec­ta­tions of $719.2 mil­lion, ac­cord­ing to an­a­lysts.

Royal Dutch Shell added that its profit ex­clud­ing one-off items and on a cur­rent cost-of-sup­plies (CCS) ba­sis – which also strips out the chang­ing value of oil in­ven­to­ries – ad­vanced 17pc to $2.79 bil­lion.

That eas­ily eclipsed fore­casts of $1.79 bil­lion, as the group was aided by ris­ing out­put and cost-cut­ting af­ter its takeover of ri­val BG Group.

“BP and Shell de­liv­ered im­proved fig­ures in the third quar­ter, but there are yet plenty of risks in the oil mar­ket as [oil] prices re­main un­der pres­sure,” said ETX an­a­lyst Neil Wil­son.

“Drilling down to the key fun­da­men­tals, oil pro­duc­ers have to cut costs to sur­vive in a lower-for-longer price en­vi­ron­ment.”

For its part, BP cut 2016 cap­i­tal ex­pen­di­ture, or capex, to $16 bil­lion com­pared with the pre­vi­ous guid­ance of be­tween $17 bil­lion and $19 bil­lion.

It warned oil re­fin­ing mar­gins would con­tinue to take a hit in the fi­nal three months of 2016, but pro­duc­tion would in­crease slightly.

BP is slash­ing costs to counter weak oil global oil prices and slid­ing mar­gins, with the cost of crude at around $46 per bar­rel com­pared with $50 a year ago.

Shell is also em­bark­ing on a cost­cut­ting drive and an on­go­ing plan to off­load $30 bil­lion of as­sets.

In the third quar­ter, Shell reaped the ben­e­fits of its re­cent £47 bil­lion ac­qui­si­tion of BG Group, which strength­ened its po­si­tion in liq­ue­fied nat­u­ral gas. How­ever, Shell chief ex­ec­u­tive Ben van Beur­den warned over the out­look.

“Shell de­liv­ered bet­ter re­sults this quar­ter, re­flect­ing strong op­er­a­tional and cost per­for­mance. But lower oil prices con­tinue to be a sig­nif­i­cant chal­lenge across the busi­ness, and the out­look re­mains un­cer­tain,” Mr van Beur­den said.

“The in­te­gra­tion of Shell and BG is now es­sen­tially done and has been com­pleted well ahead of plan. It’s been an im­por­tant cat­a­lyst for the sig­nif­i­cant and last­ing changes we are mak­ing to the work­ing prac­tices, cost struc­ture and port­fo­lio.”

Fall­ing oil prices bite into rev­enues and prof­its of en­ergy ma­jors.

US oil giants ExxonMo­bil and Chevron both re­vealed last week that low prices and weak re­fin­ing mar­gins had weighed on their thirdquar­ter prof­its.

“Oil prices are down to around a third of where they were in 2008 and as re­cently as 2014 we saw $100 a bar­rel,” added Mr Wil­son at ETX Cap­i­tal.

The price of crude slumped to un­der $30 at the be­gin­ning of this year, but has since re­cov­ered some­what to stand at cur­rent lev­els of just below $50 on over sup­ply.

“That [price drop] has huge im­pli­ca­tions for mar­gins, capex and earn­ings growth for oil ma­jors,” said Mr Wil­son.

Shell also re­vealed that it re­bounded into net profit of $1.4 bil­lion in the third quar­ter. That con­trasted with a net loss of $7.4 bil­lion last year, which was skewed by vast write-downs af­ter the scrap­ping of costly projects in Alaska and Canada.

BP mean­while saw net prof­its surge to $1.6 bil­lion from just $46 mil­lion a year ear­lier.

“De­spite the respite pro­vided by an im­proved oil price, con­di­tions re­main tough in the oil and gas sec­tor,” noted Nicholas Hyett, eq­uity an­a­lyst at Har­g­reaves Lans­down. –

Photo: AFP

Ben van Beur­den says lower oil prices con­tinue to be a chal­lenge.

Newspapers in English

Newspapers from Myanmar

© PressReader. All rights reserved.