Earnings Soar at BP, Royal Dutch Shell

Shares of both oil companies trade higher.
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European integrated oil companies

BP

(BP) - Get Report

and

Royal Dutch Shell

(RDS.A)

both reported Tuesday that their earnings for the first quarter of 2008 grew handily year over year thanks to sky-high worldwide prices for their crude and natural gas.

BP said it earned $7.62 billion, or $2.09 per ADS, compared with $4.66 billion, or $1.44 per ADS, in the first quarter of 2007. Analysts were expecting $1.74 per ADS.

Replacement cost profit, which excludes the mark-to-market gains, losses and tax effects of oil, gas and chemicals stored in inventory, was $6.6 billion, up 48% from $4.4 billion a year earlier. Replacement cost profit is considered to be a good performance indicator for oil and gas companies.

Core revenue for the quarter were $87.7 billion, up 43% from the first quarter last year. Total revenue, including income from jointly controlled entities and associates, was $89.2 billion, up from $62 billion a year earlier.

The company generated $10.1 billion in operating income from its exploration and production segment, an increase of 60% over the prior first quarter. "The result benefited from higher oil and gas realizations and a higher contribution from the gas marketing and trading and LNG businesses," BP said in a press release.

Refining and marketing income was $1.2 billion, up from $804 million during the same period last year. BP's refining profits rose in Europe and the U.S. but were down in the rest of the world.

BP spent $7.1 billion in capital expenditures during the quarter, which included a buyout of Husky Energy's interest in the Canadian tar sands. It also repurchased $1 billion of its common stock and paid out $2.6 billion in dividends.

Shares of BP were recently up 4.3% at $71.92.

Meanwhile, Royal Dutch Shell announced that its first-quarter earnings jumped 25% to $9.1 billion, or $1.47 a share, from $7.3 billion, or $1.16 a share, in the first quarter last year. Replacement cost profits grew to $7.8 billion from $6.9 billion.

The company generated revenue of $114.3 billion, up 66% from a year earlier.

"Good operating performance, combined with increased oil and gas prices, offset the impact of downstream conditions in the first quarter 2008," CEO Jeroen van der Veer said in a prepared statement.

E&P segment earnings were $5.1 billion, compared to $3.4 billion last year. The realized prices for Shell's production were 66% higher than last year, primarily because of the soaring prices for West Texas Intermediate crude and Brent crude.

Replacement cost earnings for Shell's refining segment were $1.2 billion, down from $1.5 billion a year ago. The segment's performance was negatively affected by lower realized refining margins and higher operating costs.

Shell spent $7.4 billion in capital expenditures, $1.1 billion on share repurchases, and $2.4 billion in dividends in the quarter.

Royal Dutch Shell was recently trading 4.8% higher at $80.39.

Following last week's positive earnings report by

ConocoPhillips

(COP) - Get Report

, Tuesday's first-quarter earnings beats by both BP and Shell suggest that more upside surprises could lie ahead in this earnings season.

Hess

(HES) - Get Report

will reveal its quarterly performance figures on Wednesday.

Exxon Mobil

(XOM) - Get Report

will report its results on Thursday, and

Chevron's

(CVX) - Get Report

results will follow on Friday.