PREVIEW-Refining to boost big oil company profits

* Earnings schedule: BP July 27, ConocoPhillips July 28

* Exxon Mobil, Shell July 29

* Chevron, Total July 30

* Crude up 30 percent

By Anna Driver

HOUSTON, July 22 (BestGrowthStock) – Fatter-than-expected refining
margins and higher crude and natural gas prices will lift
quarterly results at big oil companies such as Exxon Mobil Corp
(XOM.N: ) and may push profits above analysts’ estimates.

Global refining margins have suffered for the past two
years as the economic slowdown shrank demand for fuels like
diesel and gasoline. Now, gasoline demand has turned higher as
more people drive to summer vacation destinations.

Chevron Corp (CVX.N: ), the second-largest U.S. oil company,
said last week that it saw better margins at its refineries and
chemicals business. That will help integrated oil companies —
ones with exploration and refining units — beat earnings
expectations, analysts say [ID:nN12210241].

“The earnings for the integrated oil companies have been
tipped already by Chevron,” said Mark Luschini, chief
investment strategist at Janney Montgomery Scott. “We’ve seen
modest improvement in the economy, and the number of miles
driven in the U.S. is up slightly.”

Year-to-date, gasoline demand in the United States, the
world’s top oil consumer, is up nearly 1 percent from a year
ago, according to data from MasterCard’s SpendingPulse report

Paul Cheng, an analyst at Barclays Capital, said in a July
8 investor note that he expects integrated oil companies like
Chevron to beat consensus earnings estimates.

Barclays expects Exxon, the world’s largest publicly traded
oil company, to top the consensus estimate of $1.47 per share,
based on a better-than-expected performance from its refining
and chemicals business.

Analysts said European oil companies including France’s
Total SA (TOTF.PA: ) will benefit from higher refining margins.

For Total, StarMine SmartEstimates, which puts more weight
on recent forecasts of top-rated analysts, points to a profit
that could exceed the consensus estimate by nearly 3 percent.

For a graphic of U.S. gasoline demand

Starmine comparative valuations


Crude oil prices rose about 30 percent from a year ago to
an average of about $78 per barrel in the second quarter, but
were nearly flat with the 2010 first quarter. Companies like BP
Plc (BP.L: ) (BP.N: ) with heavy exposure to oil production are
seen generating the largest year-over-year profit gains.

BP and Royal Dutch Shell (RDSa.L: ) report profits on the
basis of replacement cost or current cost of supply, numbers
that exclude unrealized gains or losses related to changes in
the value of fuel inventories and are comparable to net income
under U.S. generally accepted accounting principles.

A Reuters poll of nine analysts gave an average forecast of
$4.98 billion for BP’s replacement cost profits excluding oil
spill costs and non-operating items, up 77 percent from the
same period of 2009.

Still, investors will focus on what BP has to say about
clean-up costs for the Gulf of Mexico oil spill. The British
company owned the well that ruptured and caused the worst-ever
U.S. oil spill, and it is liable for billions of dollars in
clean-up costs and other claims. [ID:nLDE66K1O3]

Shell is expected to report a 10 percent rise in cost of
supply net income excluding one-offs, to $3.48 billion.

Profit at Exxon Mobil, the world’s largest publicly traded
oil company, is expected to rise 69 percent to $6.9 billion,
according to analysts surveyed by Thomson Reuters I/B/E/S.


Investors will also look for any word that fallout from the
Gulf of Mexico is spreading.

“Because of the Gulf spill, I think you are going to see
exploration and regulatory costs go up in the United States,”
said Tina Vital, a global oil analyst at Standard & Poor’s.
“Investors are going to be looking for any impact.”

Still, she added that the accident will only have a minor
impact on oil and gas output for oil companies that are large
enough to ramp up operations elsewhere in the world.

BP, due to report earnings on July 27 ahead of other peers,
is the owner of the Macondo well that ruptured on April 20,
killing 11 men.

In response to the disaster, the U.S. government halted
most drilling in the Gulf of Mexico for six months until new
safety regulations are in place. The rules may increase costs
for companies like Exxon, Chevron and Shell that search for oil
and natural gas in the deep waters of the Gulf.

Stock Market Money

(Reporting by Anna Driver. Additional reporting by Tom Bergin
in London. Editing by Robert MacMillan)

PREVIEW-Refining to boost big oil company profits