Bloomberg.com: Exxon, BP, Shell to Report Jump in Second-Quarter Earnings: “Both stocks have beaten the 6.4 percent drop of Shell's shares”: “overstated oil and gas reserves for years, sending down the stock.”

July 26 (Bloomberg) -- Exxon Mobil Corp., BP Plc and Royal Dutch/Shell Group, the world's three largest publicly traded oil companies, this week will probably report surging second-quarter profits as increasing demand sent prices to a record.

The companies earned a combined $13.63 billion in the quarter, almost half the annual gross domestic product of Kazakhstan, analysts at Deutsche Bank AG forecast. A year ago, the three oil producers had profit of $9.96 billion. All of them report results this week, as does Eni SpA of Italy, Repsol YPF SA of Spain and Houston-based ConocoPhillips and Marathon Oil Corp.

Oil surpassed $42 a barrel in New York last month because of a growing world economy and as U.S. gasoline prices rose to a record. As the cash mounts, London-based BP, Shell and Irving, Texas-based Exxon are returning billions of dollars to investors and drilling for new fields from Russia to the Gulf of Mexico.

``The trends have been strong, probably as good as it gets,'' said Tim Rees, a fund manager at Insight Investment Management in London, which oversees the equivalent of about $130 billion in assets, including BP and Shell shares.

Crude oil in New York averaged $38.24 a barrel in the quarter, more than last year's average of $28.94. U.S. natural gas prices were 7.5 percent higher, while they surged 16 percent in Britain, western Europe's largest market for the fuel.

Exxon Mobil shares have risen 11 percent this year, more than an 8.4 percent advance at BP. Both stocks have beaten the 6.4 percent drop of Shell's shares in London. The company, based in the U.K. capital and The Hague, revealed on Jan. 9 it had overstated oil and gas reserves for years, sending down the stock.

Record Demand Growth

Exxon Mobil probably earned 88 cents a share, equal to $5.76 billion based on the number of shares outstanding in March, according to a survey of 20 analysts at First Call Corp. In the year-ago quarter, Exxon reported net income of $4.17 billion.

BP's profit probably rose to $4.1 billion and Shell's to $3.93 billion, based on a Bloomberg survey of six analysts. A year ago, BP reported profit of $2.45 billion, excluding gains from holding oil inventories. Shell had earnings of $3.34 billion, also excluding inventory-related gains.

Oil demand is growing at a record pace, led by the U.S. and China, according to the International Energy Agency. Attacks on pipelines in Iraq have lowered supply, while threats to output in Saudi Arabia and Russia raised concern of disruptions there.

Profit from refining each barrel of oil widened in the quarter, and was more than double the level of a year earlier, BP said earlier this month. That will boost results from making gasoline, heating oil and other fuels, the industry's second- largest business, after pumping oil and gas.

Earnings at Shell and Exxon have lagged consensus forecasts in four of the last six quarters. BP has exceeded estimates in four of the last six quarters.

Russia, Refining

BP is first to report, at 7 a.m. London time on Tuesday. The company in a July 2 assessment said oil and gas production jumped 17 percent because of the addition of a $6.35 billion venture in Russia. Higher prices for natural gas in the U.S., where BP is the largest producer, also boosted the result.

The profit from refining oil may beat forecasts, said Angus McPhail, an analyst at ING Financial Markets in Edinburgh. Margins from converting oil into fuels averaged $7.89 a barrel based on benchmark prices, BP said, more than double those a year ago.

``BP's refining earnings, in particular, have the potential to outperform,'' McPhail said.

Shell has struggled this year after disclosing in January that it overstated its oil reserves by 20 percent, raising concern about growth in the company's largest unit. The company will probably say profit rose to $3.93 billion, up from $3.23 billion a year ago, according to Deutsche Bank. The results are scheduled for release at 7:30 a.m. London time on Thursday.

Falling Production

Shell's result will probably show a drop in oil and gas output because of asset sales and a shutdown at a Gulf of Mexico field called Mars. Analysts at ABN Amro expect a 4 percent slide in production. Citigroup Inc. forecasts a 6 percent decline.

Once the world's largest oil company, excluding state-owned producers such as Saudi Aramco, Shell was leapfrogged when Exxon Corp. bought Mobil Corp. in 1999. BP last year overtook Shell as Europe's largest oil company by market value after BP created its Russian venture with OAO Tyumen Oil Co.

Exxon is forecast to report the largest quarterly profit of the three, of $5.6 billion in the second quarter, Deutsche Bank said. The company reports earnings on Thursday.

To contact the reporter on this story:

Alex Lawler in London alawler@bloomberg.net. 

To contact the editor responsible for on this story:

Tim Coulter at tcoulter@bloomberg.net

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