KEY POINTS:
The record oil price may be causing agony in many corners of the global economy but it has helped BP and Shell, Europe's top two oil companies, obliterate analysts' forecasts and post huge increases in first-quarter profits.
Between them, the companies recorded more than US$14 billion ($18.03 billion) in profits in the first three months of the year, during which time the price of oil broke through the US$100 dollar per barrel threshold and continued into uncharted territory. After setting a new high at US$119.93 earlier in the week, it fell slightly yesterday, trading down to US$116.40.
Shares in BP surged by more than 6 per cent on the news that its replacement cost profit had jumped by 48 per cent to US$6.58 billion up from US$4.4 billion the year before.
Analysts had expected BP, which is in the early stages of a major restructuring that will see it shed 5000 jobs and excise several layers of management, to report a smaller profit of about US$5.2 billion. The market seized on the numbers as evidence that the revamp of the group, spearheaded by chief executive Tony Hayward, was already bearing fruit.
Richard Griffith, an analyst at Evolution Securities, said: "The consensus-thrashing results, clearly aided by high oil and gas prices, have nevertheless shown that the group's turnaround is well advanced."
The company tried to downplay that perception, however, insisting its performance was due to several one-off factors, including its traders making some fortunate bets. It was the same story for Shell, which saw profits soar to US$7.78 billion, well beyond the US$6.8 billion most analysts predicted, and a major improvement in its performance during the first three months of last year. Over the intervening year, the average price at which Shell sold its products increased by 68 per cent, due to strong demand from the industrialising East and a drumbeat of unrest leading to production reductions in big producer nations like Nigeria and Venezuela.
- INDEPENDENT
