Only a few quarterly earnings reports from the exploration and production (E&P) sector to date have been unveiled, but more clarity about Gulf of Mexico (GOM) activity and the strength of natural gas drilling onshore is sure to come this week when the largest U.S. majors and some of the biggest independent E&Ps unveil their profit numbers.

Among the majors, all of which are heavy hitters both onshore and offshore in North America, BP plc and Occidental Petroleum Corp. unveil their results on Tuesday, followed by ConocoPhillips on Wednesday, ExxonMobil Corp. and Royal Dutch Shell plc on Thursday and Chevron Corp. on Friday.

Independents scheduled to announce quarterly earnings include Anadarko Petroleum Corp. and Range Resources Corp. on Tuesday, Hess Corp. and QEP Resources on Wednesday, Cabot Oil & Gas Corp. on Thursday, and Chesapeake Energy Corp. and Southwestern Energy Co. on Friday.

“I think it’s fair to say the numbers are going to be very healthy,” said Parks Paton Hoepfl & Brown’s Allen Brooks, who is managing director of the Houston investment bank.

How BP fares — it has been restructuring its operations since last year’s Macondo blowout — should indicate how the other majors will perform, said the Trefis Team. BP continued to be the top natural gas trader in North America during 1Q2011, according to NGI‘s quarterly survey of the top natural gas marketers.

“As one of the world’s leading vertically integrated oil majors, BP should deliver strong revenues supported by higher fuel prices that will bolster its upstream revenues,” said the analysts. “We also expect that record high crack spreads will help its downstream operations report better operating profit margins. These trends will impact BP as well as other oil majors such as ExxonMobil, Chevron, ConocoPhillips and Royal Dutch Shell.”

BP, the analysts noted, “now holds proven and nonproven reserves to continue production for the next 48 years. However, increasing exploration and production costs and higher crude oil prices are pushing BP and other major oil firms to focus on upstream activity and to maintain replacement ratios above 100%.”

Another major to watch this week is Houston’s ConocoPhillips, which earlier this month launched plans to split the company (see Daily GPI, July 15). It plans to become a pure-play E&P and would spin off its refining business as a publicly traded company.

Could other majors be considering the same? After ConocoPhillips decided to split its refinery arm from E&P, UBS AG, Bank of America, JPMorgan Cazenove and others recommended that BP consider the same. JPMorgan said a BP split could create $100 billion for investors. JPMorgan estimated that BP’s assets are worth a total market value of about $248 billion; the company currently trades at about $147 billion. BP’s 40% discount to the total value of its assets compares with an industry average of 27%, said JPMorgan Cazenove analyst Fred Lucas.

“On a sum of the parts basis, BP is ludicrously undervalued,” said analyst Clive Beagles of JO Hambro Capital Management Group Ltd. “Perhaps that means they need to take as radical a route as ConocoPhillips, or articulate a better strategy.”

For North America’s E&Ps Canaccord Genuity’s Phil Skolnick will be keeping a sharp eye on a few “key themes” that include:

FBR Capital Markets analysts Rehan Rashid and Saurabh Lele will be looking for validation of their belief that a “real” energy “supercycle” is under way.

“Despite the recent 7% outperformance over the last six months versus the S&P 500, we reiterate our ‘overweight’ rating” on the exploration and production sector,” said Rashid and his colleague. “We believe that this outperformance will be driven by increasing recognition by the marketplace of the magnitude of remaining reserve growth, or real asset growth, potential for the industry from the liquid and natural gas shales.”

U.S. conventional natural gas production since 1950 has totaled about 1,000 Tcf while conventional liquids production from Lower 48 since the beginning of the 20th century totaled around 160 billion bbl,” they noted. “We believe that the industry will be able to recover similar amounts of both oil and gas from the shales. Therefore, we remain bullish on the sector and believe that the reserve growth-based ‘real’ energy supercycle has just begun.”

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