BP and Shell beat their forecasts

European oil giants BP and Royal Dutch Shell yesterday beat forecasts by posting significantly higher net profits for the first quarter of this year.

BP posted a 48 per cent leap in first-quarter profits to $6.6 billion, helped by record oil prices and strong profits from trading in energy markets. Shell beat all forecasts with a 12 per cent rise in first-quarter current cost of supply (CCS) net income, helped by record oil prices that broke $100 a barrel in the period.

BP's replacement cost (RC) profit, which strips out the impact of changes in the value of fuel inventories, included a net non-operating gain of $96 million. The "clean" RC result, the figure judged by analysts to be the best measure of underlying performance, was $6.49bn, ahead of an average forecast of $5.31bn from a Reuters poll of nine analysts.

The main driver of BP's earnings was its core oil and gas production unit, which benefited from oil prices, although output was flat at 3.913 million barrels of oil equivalent per day (boepd). Output would have risen 5 per cent, BP said, if it were not for the production sharing contracts it has with resource-holders, which reduce the amount of oil BP receives from projects when oil prices rise.

BP's refining and marketing division turned in an unexpected $1.2bn profit, despite lower crude processing margins and lower throughputs at its refineries. Many analysts had expected a loss but a strong result from marketing aviation fuel and lubricants helped the company.

Excluding non-operating items, which amounted to a net charge of $77m, Shell's CCS result, which strips out the impact of changes in the value of fuel inventories, was $7.85bn. A Reuters poll of 11 analysts gave an average forecast of $6.84bn for Shell's first quarter CCS earnings, excluding non-operating items. The highest forecast was $6.99bn.

"They look like blow-away numbers and are surprising across all divisions at this time," said Jason Kenney, analyst at ING. The Hague-based Shell delivered a surprise for investors with a small boost in output.

It said production averaged 3.52 million boepd in the first three months of the year, compared to 3.51 million boepd in the same period last year. (Reuters)

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