Unsuccessful Oil Exploration leds BP and Shell Billions of Profits Loss
It's yet not over for oil prices to go plunging as BP and Shell will report this week that billions of pounds were shelled off their profits as the aftermath of low oil price associated with exploration failures strike two of Britain's biggest companies.
BP, under chief executive Bob Dudley, is expected by the City to relate an underlying profit decline of 60% to £800 million on Tuesday when it released the results for the three months to the end of September, compared with earnings of £2 billion for the same period last year; according to the report of This is Money.co.uk.
Brent crude's price per barrel has declined from more than $100 a barrel in the summer of last year to $48 a barrel today.
China's economy stutters and its oil demand has dropped, but Saudi Arabia, second biggest oil producer in the world, has refused to restrain production as it tries desperately to drive US shale oil producers out of business just to protect its market share.
During its third quarter, BP made a deal to pay £12.4 billion to the US government and several states over the Deepwater Horizon oil disaster of 2010. Rival Anglo-Dutch oil giant Shell, under chief executive Ben van Beurden, is also ready to report that it has been financially bombarded.
On Thursday, it is expected to write down the cost of its very unlucky multi-billion pound Arctic drilling fortune which only ended unsuccessfully last month.
Its fundamental profits are regarded to be £1.7 billion for the third quarter, down from £3.5 billion for the same time last year. Last month, Shell had abandoned its offshore drilling exploration on the Alaskan coast. The plan which had drawn global protests from environmentalists had taken up a fifth of the company's exploration budget since 2007.
Shell is in the process of gaining BG Group, one of Britain's premier oil and gas exploration firms, for £47 billion. On Sunday, Van Beurden told The Mail that the BG Group deal will continue despite oil price decline and the resultant lower profits which could be impacting the share prices of both firms including the terms on which the deal is based.
Investment bank UBS said: 'On the face of it, we expect BG to report earnings that are barely break-even.'
Shell jointly owns the world's largest underdeveloped gas reserves with PetroChina Company Limited. The collaboration was initially decided on, to establish a liquefied natural gas plant but dropped the idea later on and began determining strategies to supply to BG's Queensland Curtis LNG plant. It worries the Australian regulatory authority that Shell will market it to BG's Queensland plant for export instead of supplying the gas to local market, Bidness Etc. reported.
Shell is still positive that it will get about Australia's approbation. The company perceives that in the long-term, the merger will benefit Australian customers and will soon be approved.
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