Bumper 2008 for the Oil companies

The petroleum industry has established record levels of profitability in 2008.

This is the case of Shell

Royal Dutch Shell’s fourth quarter 2008 earnings, on a current cost of supplies (CCS) basis, were $4.8 billion compared to $6.7 billion a year ago. Basic CCS earnings per share decreased by 27% versus the same quarter a year ago.

  • Full year 2008 CCS earnings were $31.4 billion compared to $27.6 billion for the full year 2007. Basic CCS earnings per share for the full year 2008 increased by 16% when compared to 2007.
  • Cash flow from operating activities for the fourth quarter 2008 was $10.3 billion. Net capital investment for the quarter was $6.8 billion. Total cash returned to shareholders, in the form of dividends and share repurchases, was $2.7 billion.
  • A fourth quarter 2008 dividend has been announced of $0.40 per share, an increase of 11% over the US dollar dividend for the same period in 2007.
  • The first quarter 2009 dividend is expected to be declared at $0.42 per share, an increase of 5% compared to the first quarter 2008 US dollar dividend.

Royal Dutch Shell Chief Executive Jeroen van der Veer commented: “We delivered satisfactory performance in the fourth quarter of 2008, given the pressure on demand for oil and gas due to a weaker global economy. Our strategy remains to pay competitive and progressive dividends, and to make significant investments in the company for future profitability. Industry conditions remain challenging, and we are continuing the focus on capital and cost discipline in Shell.”

Exxon Mobil will be announcing their 2008 performance early in March.

ExxonMobil’s 2009 Analyst Meeting will take place on Thursday, March 5, 2009, with a live audio webcast beginning at 9 a.m. EST, 8 a.m. CST. The webcast will last for approximately 3 hours. ExxonMobil’s presenters will be led by Chairman and CEO, Rex Tillerson.

BP released their last quarter and final 2008 results a week ago.

For the full year, replacement cost profit was $25,593 million compared with $18,370 million a year ago, up 39%.

Total in France like other oil companies has also had a bumper year 2008.

A 14 % increase in adjusted net operating income from business segments for the year 2008 compared to 2007 was annonced earlier in Feburary.

We all recall that in 2008, we experienced the rise of the barrel of crude rising to 138 dollars. For sure there were plenty of speculations; the spectre of 200 dollars per barrel of crude soon was waived.

In a higher price situation, I postulate that the oil companies make higher margin, thus higher profit; yet when the price of the crude oil lowers to more reasonable level, the price for the consumers are readjusted with a delayed lag time but not in the same proportion as the drop of the oil.

Is it a situation of high price oil companies make increased margins, lower price they still make increased margin? This reminded me of a similar situation in my working life, where the head office of the company was charging a management fees of 20 % based on turnover with a guaranteed minimum amount irrespective of turnover. Win situation we all win; lost situation you loose and they do not loose.


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