Oil Companies Expected to Post Higher Earnings
Exxon Mobil Corp., BP and Royal Dutch Shell, the three largest publicly traded oil companies, are expected to report higher quarterly earnings this week as record energy prices compensated for losses at hurricane-damaged rigs and refineries.
The world’s five biggest oil companies, which also include Paris-based Total and San Ramon, Calif.-based Chevron Corp., might report combined net income of $26 billion for the third quarter, up 23% from a year earlier, according to Credit Suisse First Boston.
Exxon Mobil, the largest of the group, might have record earnings of $8.7 billion, according to Bank of America estimates.
“Earnings tend to follow the cycle in oil prices, and this is the peak of the cycle,” said Peter Hitchens, an analyst at Tether & Greenwood Ltd. in London.
“Going forward, there is a lot of investment from the industry in capacity,” which may send oil toward $50 a barrel in 2006, from about $60 now, he said.
Oil prices peaked at $70.85 a barrel in New York on Aug. 30, a day after Hurricane Katrina struck, closing coastal refineries and shutting U.S. Gulf of Mexico oil and gas output, which represents about 25% of the nation’s total.
Hurricane Rita swept through almost four weeks later, and production has yet to return to normal.
Shell, based in The Hague, Netherlands, and BP were hit hardest. Katrina damaged Shell’s Mars platform, which pumps more than 4% of the company’s oil. London-based BP, which reports earnings today, said on Oct. 4 that the hurricanes might cut pretax profit by more than $700 million. Repairs to the gulf’s largest deepwater platform, BP’s Thunder Horse, will cost an extra $100 million.
“The real hit one takes, especially during a period of high oil prices, is the production loss, and that may be more than the damage” costs, Jeroen van der Veer, Shell’s chief executive, said Sept. 29.
BP probably will report third-quarter profit of $5.68 billion, up 36% from a year earlier, and Shell may post earnings of $5.38 billion, up 22%, according to the average of six analysts surveyed by Bloomberg. Both profit estimates exclude gains or losses from holding inventories and are before one-time items. Chevron’s profit may be the highest for five quarters, according to Thomson Financial.
BP’s third-quarter production was 2.8% less than in the year-earlier period, the company said Oct. 4. Shell’s production probably will drop by 9.3% to 10%, according to CSFB and UBS estimates.
Exxon, based in Irving, Texas, also lost production in the Gulf of Mexico because of the storms.
*
The Week Ahead
Today
* Quarterly earnings report expected from Clear Channel Communications Inc.
Tuesday
* The National Assn. of Realtors reports September U.S. existing-home sales.
* The Conference Board reports its index of consumer attitudes for October.
* Quarterly earnings reports expected from Northrop Grumman Corp. and Lockheed Martin Corp.
Wednesday
* Quarterly earnings report expected from Boeing Co.
Thursday
* The Commerce Department reports new-home sales and factory orders for durable goods in September.
* Quarterly earnings report expected from Microsoft Corp.
Friday
* The Commerce Department reports the nation’s gross domestic product for the third quarter.
* The University of Michigan reports its consumer sentiment index for October.
* Quarterly earnings report expected from Chevron.
