* All companies seen reporting rising profits
* Brent 38 pct higher, refining margins triple
* Middle East conflict boosts oil prices
* Japan earthquake spikes gas prices
By Tom Bergin
LONDON, April 21 (Reuters) - The big western oil companies, including Exxon Mobil (XOM.N) and Royal Dutch Shell (RDSa.L), are expected to report strong growth in first-quarter profits next week, thanks to higher crude prices and refining margins.
A 38 percent rise in Brent crude in the quarter compared with the same period last year, due to strong global demand and political upheaval in the Middle East, will more than outweigh the impact of falling production at many companies, analysts said.
Exxon, the world’s largest non-government controlled oil company by market capitalisation, is expected to report a 59 percent rise in net income to $9.99 billion, also boosted by its acquisition of XTO last year, according to I/B/E/S estimates.
Industry number two Shell is expected to post a 22 percent rise in current cost of supply (CCS) net income, excluding one-off items, to $5.89 billion, while U.S. rival Chevron is forecast to report a 29 percent rise in net income to $5.92 billion.
“The year-on-year figures will look fantastic,” said Iain Armstrong, oil analyst at brokerage Brewin Dolphin, even though the kinds of contracts oil companies have with resource holders means they pay increasing taxes as oil prices rise, so they don’t get the full benefit of the rise.
London-based BP (BP.L), however, is expected to produce anaemic results as it is still suffering from the effects of last year’s Gulf of Mexico oil spill.
An around 10 percent drop in the oil major’s oil and gas output, due to field sales to help pay for the disaster, is expected to limit the predicted rise in replacement cost (RC) net income, excluding one-off items, to only 2 percent, at $5.79 billion, according to a Reuters poll of nine analysts.
CCS and RC net income exclude unrealised gains or losses related to changes in the value of oil inventories, and so are comparable to net income under U.S. accounting rules.
Fighting in Libya has cut output for some companies -- most notably Italy’s Eni (ENI.MI) -- and a recent hike in UK North Sea taxes will eat into profits, but the outlook for companies, especially in the United States, is seen as strong thanks to rising oil prices.
“Select Big Oils are on the cusp of a period of significant free cash generation,” analysts at Credit Suisse said in a research note.
“Cashflow per share at the U.S. Big Oils should outpace the S&P (stock market index) ... We remain overweight the U.S. Big Oils against the S&P but are more cautious on European IOCs (international oil companies) against the European Market,” the investment bank added.
Oil companies are also expected to report strong profits from processing crude for the first quarter. Global refining margins more than tripled in the first three months of the year, compared with the same period in 2010, according to BP data.
Last month’s earthquake in Japan will also benefit some gas producers, as it prompted a spike in North Sea gas prices, and supported prices of liquefied natural gas, as dealers predicted the shutdown in Japanese nuclear plants would lead to more gas-fired power generation.
However, some analysts say the market may have priced in too much positive news.
“There is the potential that people will sell the news,” said James Dailey, portfolio manager of the TEAM Asset Strategy Fund in Harrisburg, Pennsylvania.
“I would be surprised if there are any misses, but with the stocks up as much as they have been, the companies are going to have to beat estimates and guide higher. I think we are set up for disappointment.” (Additional reporting by Anna Driver in Houston; Editing by Will Waterman)