Shell and BP profits to crash on cheaper oil

By Tom Bergin

LONDON (Reuters) - Royal Dutch Shell and BP are expected to report 70 percent profit declines in the coming week on lower oil prices, and some analysts expect even worse to come in future quarters.

A Reuters poll of seven analysts gave an average forecast of $2.62 billion (1.8 billion pounds) for Shell's first-quarter current cost of supply net income, excluding one-off factors.

The world's second-largest non-government controlled oil company by market value had "clean" CCS profits of $7.85 billion in the same period last year.

BP (BP.L), Europe's second-largest oil company, is expected to report a replacement cost net profit, excluding one-offs, of $2.28 billion, compared with $6.49 billion last year.

RC and CCS are profit measures which strip out unrealised gains or losses related to changes in the value of fuel inventories, which analysts feel do not impact the companies' finances.

The profit falls will be echoed across the sector, analysts say, as a collapse in the Brent crude price to around $44/bbl from $97/bbl a year earlier eats into earnings.

Investors are concerned the plunge may lead to cuts in the oil majors' generous dividends, for many shareholders the key reason to own oil stocks.

MORE PAIN