November 2, 2023 [City am]- Oil and gas giants BP and Shell are set to reap the benefits of climbing oil prices, according to analysts, as both prepare their third-quarter results.
BP is due to report its results on Tuesday, while Shell will release its earnings on Thursday.
The two firms are some of the most important London-listed stocks, with Shell having the largest market cap on the FTSE 100, with BP just below in fifth.
Shell shares hit a record high earlier this month amid rising energy prices, with BP trailing behind.
“BP’s share price has struggled to keep up, although it did manage to get close to the highs of earlier this year,” said Michael Hewson, chief market analyst at CMC Markets.
Hewson noted “uncertainty at the top of the UK’s second biggest oil company” hasn’t helped the firm, after BP’s chief executive Bernard Looney stepped down last month over failing to disclose past relationships with colleagues. The boss of BP’s US operation, Dave Lawler, also resigned a few weeks later.
“When BP reported in Q2 it was widely expected to come in short of expectations, however, with the bar lowered it still failed to clear it,” Hewson added.
Weak refining margins and falling oil and gas prices weighed on the firm’s profits, and it announced a fresh buyback scheme.
Its guidance for the third quarter expected flat upstream production, lower oil production output and higher gas and low-carbon energy compared to the second quarter.
Shell, however, appears to be in a steadier position for now.
Shares have rallied under Wael Sawan, who took over in January, after he pledged to maintain oil output while increasing natural gas production.
“While this has caused some unease in some parts of the Shell business, it appears to be an acknowledgement of the reality that the transition to renewables will be a gradual process especially given the current levels of geopolitical uncertainty,” Hewson said.
Russ Mould, investment director at AJ Bell, highlighted Shell’s focus on hydrocarbon production and a recovery in oil prices as the main factors for its recent share success.
Shell’s second-quarter results saw adjusted profits miss expectations, driven by sharp falls in both natural gas and crude oil prices.
However, oil and gas prices have rallied in recent weeks as conflict in the Middle East has sparked concern over supply shortages.
Despite the price rallies, analysts expect revenues for both firms to dip for the period.
Analysts expect BP’s third-quarter revenue to decrease by 9.4 per cent to $49.9bn and its earnings-per-share (EPS) fall by 55.8 per cent to 24 cents, according to data from Reuters.
Shell’s revenue is forecast to decline by around 13 per cent, with its EPS falling by 23.7 per cent.
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