Business bouncing back
12 May 2010
Despite some lingering uncertainty, business is clearly rebounding for major players in the oil & gas and petrochemicals sectors. Patrick Raleigh reports
The economic recovery seems to be well underway - at least going on first quarter financial results from a range of major players in the oil & gas and petrochemicals industries. However, the upturn has brought with it early signs of pressures on supply and costs, while some view prospects for the coming year as still uncertain.
Higher oil & gas prices, however, have definitely helped energy groups to achieve huge increases in profitability compared to the first three months of last year - when the global recession was perhaps at its deepest. The strongest performers included Shell, which reported first quarter earnings of $4.9 billion compared to $3.3 billion a year ago, and BP whose first-quarter replacement cost profit increased 135% on a year ago to $5,598 million.
“Our results reflected the successful ramp-up of our new upstream projects in Russia and Brazil, supporting a 6% increase in our production volumes and a 38% increase in sales volumes, in our industry-leading LNG business,” said Peter Voser, Shell CEO.
Voser, however, saw mixed signals for the near-term outlook. “So far in 2010, oil prices have remained firm, and demand for petrochemicals has increased, but refining margins, oil products demand and spot gas prices all remain under pressure. Although there are signs of an improving economic outlook, we are not relying on it.”
In the chemicals sector, BASF said demand rose “strongly” across all divisions in first quarter 2010. Profits almost doubled to Euro1.95 billion on sales 26% higher at Euro15.5 billion. The German group linked the improvements to general economic recovery, some restocking of inventories, and noted that some chemical products were now in short supply.
“Our industry business, that is the Chemicals, Plastics, Performance Products and Functional Solutions segments, grew substantially thanks to renewed demand from almost all customer industries, particularly from the automotive, electric and electronic industries,” said BASF boss Jürgen Hambrecht. “Regionally, we saw high demand in Asia and South America. North America is also slowly recovering. Europe is bringing up the rear.”
Capacity utilisation
Another impressive performer was DuPont, which posted Q1 2010 net income of $1,129 million, compared to $488 million in the prior year, on sales up 23% at $8.5 billlion The improvement, said DuPont, reflected significantly higher sales volumes, increased capacity utilisation, higher selling prices, currency gains and lower raw material costs.
DuPont was upbeat about the outlook for 2010, expecting stronger sales growth and improved pre-tax operating margins, supported by continuing global economic expansion with particularly strong demand in Asia Pacific.
At Dow Chemical, like-for-like sales were up 33%, with improvements of 27% in North America, and 35% in Europe, Middle East and Africa. Earnings (EBITDA) at $1.8 billion, were up $877 million versus the same quarter last year.
Dow boss Andrew Liveris said: “Strengthening consumer spending in areas such as electronics, appliances and automotive, combined with strong growth in emerging geographies, are driving broad-based [growth]. This, coupled with our global operating rates returning to levels not seen since the second quarter of 2008, points increasingly to a sustainable upturn.”
INEOS, meanwhile, posted earnings of Euro494 million, compared to Euro201 million for Q1, 2009, on sales of Euro5.6 billion compared to Euro3.8 billion a year ago. Refining benefited from higher crude oil prices, while the group noted record profitability across its chemical businesses in March, and high demand for chemical intermediates. Utilisation rates in the group’s nitriles and phenol businesses were at their maximum levels, while acrylonitrile has now tight and margins at record highs.
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