Output challenge denies Big Oil best of Q3 bonanza

By Andrew Callus and Braden Reddall
LONDON/SAN FRANCISCO, Oct 26 (Reuters) - Top oil companies
in the western world are missing out on the full benefits of
strong crude prices because of costly production outages and
delays in bringing on new capacity, third-quarter results are
set to show.
"Earnings are... down 13 percent year-on-year, worse than
the 2 percent decrease in Brent prices - once again
demonstrating the majors' poor margin capture in a strong
commodity price environment and rising cost pressures," said
Credit Suisse analysts in a note on the top European players.
The Brent crude international price benchmark averaged
$109.42 a barrel in the third quarter against $112.09 a year
earlier and little changed from the second quarter.
"Natural gas in the U.S. was also down, so that will put
pressure on the earnings. In general, refining has improved so
it may be a bright spot for some of the companies. It (refining)
has been a much better business this year than last year," said
Brian Youngberg, oil analyst at Edward Jones.
"But a lot of these big oil companies are still just
struggling to grow production."

Exxon Shell Chevron BP
Mean est EPS Q3 ($) 1.96 1.13 2.85 1.29
Est % change on year -8 0 -22 -21
Price % chg past 90 days 4.6 -2.7 2.1 3.3
Market cap ($ billions) 415 220 215 132
Source: ThomsonReuters
Starmine

Norwegian group Statoil's results on Friday
reinforced the trend as it flagged a major fourth-quarter
maintenance outage.
Investors may be belatedly adjusting their expectations
towards a forecasting-beating quarter for the top companies, in
the upstream at least, after two smaller U.S. players,
Occidental and Conoco, turned in better than
expected quarterly figures on Thursday.
And many of the output challenges of the quarter were
transient ones - down to outages in the U.S. Gulf, North Sea and
elsewhere.
However, there is gathering concern among investors that the
industry is running ever faster to stand ever more still.
"The majors are spending quite heavily to extend the
duration of their portfolio, both with long lived development
projects in LNG and oil sands and through more aggressive global
deepwater exploration programs.
"They have yet to convince the market that this capex will
reignite growth, and who says we should be convinced?" asks
Tudor Pickering Holt & Co analysts Robert Kessler and Brandon
Mei in their preview note.
On Friday oil was down to around $108 a barrel and heading
for its second weekly drop, pressured by expectations U.S.
economic growth would be unable to bolster the demand outlook
and by Europe's debt crisis.
Among individual top companies, analysts will be looking for
an update from Exxon Mobil on its plans for Canada,
where it has just announced a new acquisition, while Royal
Dutch/Shell will be quizzed on why its long-promised
new project volumes have still not materialised in the third
quarter.
Chevron was hit hard by the upstream outages and
will have missed out on much of the improved refining margins.
The closure of its Richmond refinery after a fire there was the
main cause of the supply squeeze.
BP's conference calls will be dominated by its twin
travails: The uncertain future for its investments in Russia and
looming U.S. oil spill litigation.
Total will be a major beneficiary of the refining
margin upturn, which spread to Europe as well, but the focus of
attention will be on a wave of project final investment
decisions (FIDs) coming up in the months ahead.