Oil giants BP and Shell expect pumped up profits after barrel price rise
Oil and gas giants Shell and BP are expected to report boosted profitability this week after oil prices breached $85 (£66.2) dollars per barrel in the third quarter.
On Tuesday BP is expected to reveal a jump in profits from £2.82bn to an estimated £2.9bn according to S&P Capital IQ, while on Thursday Royal Dutch Shell will reveal its third quarter results and is expected to see profits rise from $4.69bn to around $5.56bn.
“A significant improvement in profitability should be expected,” said Graham Spooner, investment research analyst at The Share Centre, commenting on BP.
“This is on the proviso that production did not suffer any setbacks and judging by the first half, plant reliability and uptime was high.
“Investors should expect production to rise though as new production facilities have come on-line while we will also see the inclusion of production from the acquisition of shale assets from BP.
“Investors will also hope that the improvement we saw in the Rosneft operations during the last quarter followed through, however, its Downstream business may still have found conditions tough due to the refining market.”
CMC Markets analyst Michael Hewson added: “Earlier this month BP shares hit their highest levels since 2010 in the wake of the Deepwater Horizon oil spill, touching 600p briefly before slipping back.
“The rebound in oil prices saw its profits jump by 71 per cent earlier this year, with revenues rising in both its upstream and downstream businesses.
“In the summer BP paid BHP Billiton $10.5bn for its shale assets to help boost its US business, after years of asset disposals in order to help pay its costs for the 2010 oil spill.
“In a further sign of improving fortunes the company hiked its dividend for the first time in 4 years, despite taking another $700m hit on costs linked to the Gulf of Mexico oil spill. Management should now think seriously about taking steps to lower the amount of debt, which has been on the high side for some time, particularly since interest rates appear to be rising and oil prices are high.”
French oil titan Total saw profits soar in the third quarter on higher oil prices, it revealed last week, as net income rose by 48 per cent to $4bn.