Quarterly profits: BP, Shell log upbeat gains, warn on oil prices

Both companies exceed expectations but oil market risks remain

LONDON: British energy major BP and its Anglo-Dutch rival Shell unveiled upbeat quarterly profits on Tuesday as both kept a tight rein on costs but warned over low oil prices.

BP’s underlying replacement cost profit -- the benchmark industry measure, which excludes exceptional items and oil price fluctuations -- tumbled 49% to $933 million (851 million euros) in the three months to September from a year earlier.

However, that comfortably beat expectations of $719.2 million, according to Bloomberg.

Royal Dutch Shell added that its profit excluding one-off items and on a current cost-of-supplies (CCS) basis, which also strips out the changing value of oil inventories, advanced 17% to $2.79 billion.

That easily eclipsed forecasts of $1.79 billion, as the group was aided by rising output and cost-cutting after its takeover of rival BG Group.

“BP and Shell both delivered improved figures in the third quarter, but there are yet plenty of risks in the oil market as (oil) prices remain under pressure,” said ETX analyst Neil Wilson.

“Drilling down to the key fundamentals, oil producers have to cut costs to survive in a lower-for-longer price environment.”

In reaction to the results, Shell’s ‘B’ share price rallied 3.7% but BP sagged 1.6% on London’s rising stock market.

For its part, BP cut 2016 capital expenditure to $16 billion compared with the previous guidance of between $17 billion and $19 billion.

It warned oil refining margins would continue to take a hit in the final three months of 2016, but production would increase slightly. BP is slashing costs to counter weak global oil prices and sliding margins, with the cost of crude at around $46 per barrel compared with $50 a year ago.

Published in The Express Tribune, November 2^nd, 2016.

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