Big Oil Aint What It Used To Be – US-FOREX.US
A year ago, the world’s major oil companies were at the peak of a commodities boom-fueled by volatility in other areas of the financial marketplace-that had pushed up the price of black gold to nearly 150 per barrel. The recession put paid to that particular bubble, and on Tuesday BP revealed its second-quarter profits had halved over the year, to 3.1 billion, more or less in line with the 50% decline in oil prices over the year.Strangely enough, it wasn’t all doom and gloom in the earnings report, which actually came in ahead of estimates. Reported quarterly production was 4% higher than last year, at 4 million barrels a day, mostly helped by gas; the company said it had achieved its target of 2 billion in cost cuts by mid-2009; and it also maintained its dividend at 14 cents per share.But even BP
boss Tony Hayward was in a bearish mood, saying the firm saw “little evidence” of any demand growth in the near future. “[We] expect the recovery to be long and drawn out,” he said.Shares of BP slumped 1.6%, to 510.95 pence , during morning trading in London, while rival Royal Dutch Shell
ticked up 0.2% and Total
slipped 0.6%. The industry is in cost-cutting mode as it attempts to cope with the economic downturn: The International Energy Agency predicts global demand for oil will drop 2.9% this year, to 83.3 million barrels per day.DnB Nor analyst Gudmund Halle Isfeldt said BP had delivered a “straightforward set of numbers,” and recommended the stock as his top sector pick along with Royal Dutch Shell and StatoilHydro. Although Isfeldt said BP had suffered slightly in the quarter from a weak American gas market, he added the company’s increased cost-cutting guidance and decent refining margins made it “ahead of the curve” relative to competitors.BP was also positively singled out by Deutsche Bank analyst Lucas Herrmann earlier this month, though he listed weak demand, faltering gas markets, “collapsed” refining margins and feeble petrochemical profits as the drivers behind an expected 66% quarterly earnings drop for the industry.