Shell expected to benefit from BP's disastrous leak

Jul 26 2010 by Iain Laing, The Journal

SOME of the UK's biggest firms will be in the spotlight this week during a major test of confidence for the London market.

The biggest crisis in BP’s long history threatens to tip the oil giant into the red for the first time since 1992 when it gives more details tomorrow on the havoc wreaked by the Gulf of Mexico spill.

Although the final bill is not yet known, the provisions for the impact of the Deepwater Horizon disaster could submerge the £3.3bn in underlying profits expected for the second quarter, a 60% rise on a year earlier.

BP reported its first-quarter figures just a week after the explosion when the magnitude of the disaster was not yet apparent and media scrutiny was focused on the looming General Election.

But since then the company has axed its dividend for the first time since the Second World War and the company and its chief executive Tony Hayward found themselves at the centre of a storm.

Shares are down more than a third from their peak while the firm has set up a $20bn compensation fund to assuage fury in the US.

The cost of the clean-up is estimated at around £2.6bn so far, with assets in the US, Canada and Egypt sold to rival Apache, raising £4.6bn for the cause.

Although BP should finally kill the leaking well next month with the completion of a relief well, heavy financial penalties also await.

Rival Royal Dutch Shell’s results on Thursday should be far less eventful, and analysts expect a 25% increase in underlying profits to around £2.6bn for the second quarter.

The firm is looking to dispose of around 15% of its refining capacity as well as developing new production sources, with 13 projects due to come onstream over the next year.

Transport group National Express expects to show good progress in boosting half-year profits on Thursday thanks to a major cost-cutting drive under former Tube Lines boss Dean Finch.