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NEW YORK -- Royal Dutch Shell Plc and BP PLC, two of the United States’ largest oil companies, may post the biggest drop in quarterly earnings in at least five years now that the recession has dragged down crude prices, according to a report by Bloomberg News.
U.S. oil futures averaged $43.31 a barrel in the first quarter 2009—56 percent lower than a year earlier—after plunging from a record $147.27 reached in July, the report stated.
Shell and BP responded by shelving projects and demanding price cuts from suppliers. BP may scale back its joint Sunrise oilsands project in Alberta to cut expenses, while Shell said industry costs could fall as much as 50 percent, Bloomberg News reported.
"We are going to see a very substantial drop in income and there’s very little they can do about costs in the short-term," said Colin Morton, who helps manage roughly $2 billion, including BP and Shell stock, at Rensburg Fund Management in Leeds, England. "It’s going to be quite a tough period."
BP’s first-quarter earnings are due this morning. A Bloomberg survey of nine analysts showed BP’s earnings may decline to $2.2 billion from $6.49 billion.
Shell is slated to report its first-quarter earnings Wednesday. Based on the median estimate of 11 analysts compiled by Bloomberg, the company is likely to report first-quarter profit, excluding one-time items and inventory changes, slumped 67 percent to $2.56 billion from $7.85 billion last year, according to the report.
ConocoPhillips, the third-biggest U.S. oil producer, recently said the company’s net income declined 80 percent to $840 million. Exxon Mobil Corp., the world’s largest company by market value, will release its results on Thursday, the report stated.
-- Lower Energy Prices Batter ConocoPhillips Q1 Results
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