Oil companies had strong earnings in first quarter

Posted on Sat, May. 03, 2003 By Alex Lawler Bloomberg News

LONDON - Royal/Dutch Shell Group and ChevronTexaco said first-quarter profits more than doubled, capping a week of record oil earnings, because prices surged amid war in Iraq and supply disruptions in Nigeria and Venezuela.

Shell, Europe's largest oil company by market value, said net income jumped to $5.33 billion from $2.26 billion in last year's first quarter. At ChevronTexaco, the No. 2 U.S. oil company, profit rose to $1.92 billion from $725 million. Sales climbed 53 percent at Shell and 46 percent at ChevronTexaco.

The combined first-quarter profits at the two companies and rivals ExxonMobil and BP tripled to $17.8 billion as crude-oil prices climbed to a 12-year high and refining margins widened. Prices have since fallen by a third, signaling lower earnings over the rest of this year.

``The question after a quarter like this one is, what do you do for us next?'' said James Halloran, who helps manage $24 billion, including nearly 1.3 million ChevronTexaco shares, at National City Wealth Management.

After adjusting for one-time items and changes in the value of inventories, Shell's profit increased 96 percent to a record $3.91 billion, beating the average estimate of $3.67 billion in a Bloomberg survey of analysts.

ChevronTexaco's profit was the highest since the company was formed through Chevron's purchase of Texaco in 2001. The company's exploration and production earnings rose 73 percent from a year earlier to $1.97 billion. Profit from oil refining was $315 million after a $61 million loss a year earlier.

Higher natural-gas prices, spurred by colder-than-normal weather across much of the United States, contributed to the profit gains. The average first-quarter price for U.S. gas futures more than doubled from a year earlier to $5.32 per million British thermal units.

This may be a high-water mark for the oil companies,'' said Tim Ghriskey, who manages $100 million in assets, including an undisclosed number of ChevronTexaco and Exxon Mobil shares, at Ghriskey Capital Management LLC. Oil prices have already dropped, and you are likely to see second-quarter profits lower.''

Higher prices didn't prompt Shell, ChevronTexaco and other oil companies to boost investment in exploration and production, largely because the gains weren't expected to hold.

ExxonMobil, based in Irving, Texas, is the world's biggest investor-owned oil company by market value. The company yesterday reported that first-quarter profit more than tripled to $7.04 billion. London-based BP, the No. 3 oil company by market value behind Exxon Mobil and Shell, on Tuesday said its profit quadrupled to a record $3.47 billion.

Meanwhile, crude oil prices rose a third day, bolstered by slowing imports into the U.S., where inventories are 10 percent lower than average for this time of year.