Big Worries for Big Oil [Wall Street Journal]
Summary: BP, ExxonMobil, and Royal Dutch/Shell are watching as the heady days of $80 a barrel oil seem to be on the wane. This summer's sky-high oil prices boosted earnings and quarterly profits for all of the oil companies. Q2 combined earnings for all three companies were $25 billion; Q305 profits were $25.4 billion. But with West Texas crude down to $58 a barrel, the oil majors are starting to shift gears and hunker down for leaner days. Analysts expect that skyrocketing oil-field costs and recent disruptions (Prudhoe Bay, violence in Nigeria) will affect this week's earnings reports; forecasts are for earnings +10% over last year, but -10% over last quarter. More consolidation among the oil companies could be one response to dropping oil prices, such as Royal Dutch Shell's plans to buy up the remainder of Shell Canada. Shell CEO Jeroen van der Veer says that oil price is, "is probably one component of a total mix" of variables affecting the decision to buy out Shell Canada.
Related links: The Rise and Fall of Oil: Roach Motel Theory • S&P 500 Sector Tracker: Consumer Discretionary, Tech and Industrials Best Since Oil Peaked • Oil Prices Headed Back Up After the Midterm Election • Reuters: Shell says oil price drop won't cut energy projects • Bloomberg: European Stocks Decline, Led by Shell, Total as Oil Prices Drop •
Potentially impacted stocks and ETFs: Stocks: BP (BP), ExxonMobil (XOM), ConocoPhillips (COP), Chevron (CVX), Royal Dutch/Shell (RDS.A) • ETFs: Vanguard Energy ETF (VDE), Energy Select SPDR (XLE), BLDRS EUR 100 FD (ADRU)
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