Shell, BP Profits May Drop Most in Five Years on Oil

Royal Dutch Shell Plc and BP Plc, Europe’s largest oil companies, may post the biggest drop in quarterly earnings in at least five years after the recession dragged down crude prices.

U.S. oil futures averaged $43.31 a barrel in the quarter, 56 percent lower than a year earlier, after plunging from a record $147.27 reached in July. The companies responded by shelving projects and demanding price cuts from suppliers. BP may scale back its joint Sunrise oil-sands project in Alberta to cut expenses, while Shell has said industry costs could fall as much as 50 percent.
“We are going to see a very substantial drop in income and there’s very little they can do about costs in the short-term,” said Colin Morton, who helps manage about $2 billion, including BP and Shell stock, at Rensburg Fund Management in Leeds, England. “It’s going to be quite a tough period.”

Shell is likely to report April 29 that first-quarter profit excluding one-time items and inventory changes slumped 67 percent to $2.56 billion from $7.85 billion last year, based on the median estimate of 11 analysts compiled by Bloomberg. BP’s earnings due tomorrow may have declined to $2.2 billion from $6.49 billion, a survey of 9 analysts showed.

Bloomberg