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Profits on a Roll for BP, Shell, Chevron

Even taking into account the 17% rise in oil prices in the first three months of the year, BP plc and Royal Dutch Shell plc still managed to deliver higher quarterly profits than energy analysts had forecast, sending both companies' share prices up last week. Chevron Corp., which issued its earnings report Friday, saw its net income up 9.6%, and it nearly doubled its production profits.

London-based BP posted a 63% jump in 1Q2008 net income to $7.62 billion (40 cents/share) from $4.66 billion (23.9 cents) in 1Q2007. Excluding special items, BP's quarterly profit topped $6.49 billion, well ahead of Wall Street's median estimate of $5.26 billion. BP's revenue rose almost 44% to $89.2 billion from $62 billion. BP's 1Q2008 oil and gas production also was flat from a year ago at 3.9 million boe/d, but the company noted that output was 5% higher sequentially from 4Q2007. The company is in the process of simplifying its operations worldwide to boost production. In April the company said it planned to exceed its production goals through 2020 (see NGI, April 21).

BP ramped up production from its deepwater Gunashli field in the Caspian Sea in early April. Thunder Horse, in the deepwater Gulf of Mexico, now is expected to begin operations later this year following a series of delays over the past three years. BP also said it had completed some repairs at its Whiting, IN, plant and in Texas City, TX, where an explosion killed 15 people in 2005.

Shell, headquartered at The Hague in the Netherlands, had a 25% gain in quarterly net profit to $9.08 billion ($1.46/share) from $7.28 billion ($1.15) a year earlier. Excluding special items, Shell's profit was $7.85 billion, which was ahead of the $6.88 billion median estimate by financial analysts. Revenue jumped 56% to $114.3 billion from $73.5 billion in 1Q2007.

"Good operating performance, combined with increased oil and gas prices, offset the impact of downstream conditions in the first quarter 2008," said Shell CEO Jeroen van der Veer. The CEO, who is scheduled to retire in June 2009, pointed to increasing natural gas production worldwide, which made up for a drop in crude oil output. Problems in its Nigerian operations resulted in a shut-in of about 164,000 b/d during 1Q2008.

Despite the problems in Nigeria, Shell's total oil and gas production was flat from a year earlier at about 3.5 million boe/d. Gas production was up 9% while oil production fell 6%. Shell expects to spend $26-27 billion in capital expenditures this year, which the company said would add up to 1 million boe/d of production and 300,000 b/d of downstream capacity.

Both BP and Shell's numbers conform to international financial reporting standards, which differ from U.S. generally accepted accounting principles.

Chevron, the second largest U.S.-based major behind ExxonMobil Corp. (see related story), posted net income of $5.17 billion ($2.48/share), up from $4.72 billion (2.18) a year earlier. The results included $255 million in charges; the prior year had a $700 million gain from the sale of some overseas assets. Revenue climbed 37% to $66 billion. Upstream earnings soared 76% to $5.13 billion. The San Ramon, CA-based producer's worldwide daily oil and gas production dipped slightly 0.2%. The average price of natural gas increased $1.15/Mcf to $7.55.

Chevron's net U.S. natural gas sales in the first three months rose to 8.0 Bcf/d from 7.9 Bcf/d in 1Q2007. Net U.S. gas production on average declined slightly in the period to 1.66 Bcf/d from 1.72 Bcf/d a year earlier. Worldwide gas production rose on average to 5.434 Bcf/d from 4.99 Bcf/d.

Chevron said Friday its 75%-owned Blind Faith development in the deepwater Gulf of Mexico has been delayed until the second half of the year because of a problem with its mooring lines. Ramp-up had been expected before the end of June. Blind Faith is expected to produce about 70,000 boe/d shortly after production begins, the company said.

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