January 29, 2009 / 3:24 PM / 9 years ago

WRAPUP 3-Oil co profits dip with crude, majors capex steady

* Oil profits hit, 2009 capex plans vary with company size

* Shell’s 2008 profit a record for a European company

* Shell shares rise in London, North American rivals down

* Shell sees 2009 production flat or down, Oxy bullish (Adds Imperial Oil paragraphs 3 and 13, closing share prices)

By Tom Bergin and Braden Reddall

LONDON/SAN FRANCISCO, Jan 29 (Reuters) - Royal Dutch Shell Plc (RDSa.L) and Occidental Petroleum Corp (OXY.N) reported big slides in profits on Thursday, while Petro-Canada PCA.TO swung to a loss due to the collapse in crude oil prices.

But steady 2009 spending plans from Shell and Chevron Corp (CVX.N), two of the world’s top-four listed oil companies, demonstrated how much sheer size will help bigger players weather the slump in anticipation of an energy price recovery.

Imperial Oil Ltd (IMO.TO), Canada’s biggest producer and refiner, even plans to increase capital spending this year.

Shell said Current Cost of Supply net profit, stripping out unrealized losses on changes in the value of inventories, fell to $4.79 billon, down 28 percent from the same period in 2007.

Yet the ramp up of oil prices to new highs above $147 a barrel in July lifted annual profits to $31.4 billion — a record for a European company and up from $27.6 billion in 2007.

Occidental, the fourth-largest U.S. oil company, said it would react to a nearly 70 percent drop in quarterly earnings by slashing spending by 25 percent in 2009. [ID:nN28532533]

On the cost side, Oxy Chief Financial Officer Stephen Chazen welcomed the drop in steel prices for drilling, but said oil services providers were still charging too much.

“We’ve begun to see some reduction from some of the service companies, but certainly not the order of magnitude we would like to see,” Chazen told analysts on a conference call. “Looking at their results, looks like they’re still making too much money to me.”

Oilfield services company Smith International Inc SII.N reported profit growth on Thursday, but its shares lost 13 percent as it gave a cautious outlook and weak spending plans.

Petro-Canada, Canada’s No. 4 oil producer and refiner, said market uncertainty could force it to scale back even further on its capital expenditures than previously envisaged, and warned this could hit output. [ID:nBNG390427]

Murphy Oil Corp (MUR.N) said it would spend $1.5 billion this year, but would cut costs and may eliminate more capital spending if oil and gas prices weaken further. [ID:nN29281524]


This caution contrasted with the financially deep majors. Shell planned to lift investment in new projects to $31 billion to $32 billion, from $30 billion in 2008, while Chevron said 2009 spending would be flat, at $22.8 billion. [ID:nN29420751]

Imperial Oil, majority-owned by U.S. oil leader Exxon Mobil Corp (XOM.N), reported a 26 percent drop in quarterly profit but said it will boost capital spending by 60 percent in 2009. [ID:nN29418120]

Many investors hold Shell and other majors for their fat dividends and some worried lower oil prices would put pressure on payouts. Shell eased these fears by proposing a 5 percent rise in its first-quarter dividend to 42 cents per share.

Shell said oil and gas production was down slightly in the quarter compared with the same period in 2007 at 3.415 million barrels of oil equivalent per day (boepd), and expected output to be flat or down this year. [ID:nLT769437]

But Los Angeles-based Oxy said that for the fourth quarter, oil and gas sales volumes averaged 620,000 boepd, up from 590,000 a year before, and Chief Executive Ray Irani aims to increase production by 5 percent in both 2009 and 2010.

Shell’s London-listed “A” shares rose 1.4 percent to 1,801 pence. But Occidental fell 4.3 percent to $56.82 as U.S. stocks fell across the board, while shares of Exxon and Chevron, which both report earnings on Friday, suffered similar declines. (Editing by Hans Peters, Maureen Bavdek and Bernard Orr)

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