Oil and gas company profits soar

Oil and gas extraction companies increased their profits to 57.6 per cent in the first quarter, as wholesale prices soar.

Official figures from the Office for National Statistics (ONS) show returns for oil and gas extraction companies 57.6 per cent in the first quarter, compared to 51.3 per cent in the previous quarter and an average of 35.2 per cent for 2007.

This compares to an overall decline in the profitability of UK private non-financial corporations in the first quarter of 2008 to 15.3 per cent, from 15.4 per cent in the last quarter.

Manufacturing companies, which are particularly affected by the price of oil, had a rate of return of just 4.9 per cent in the first quarter – lower than the average of 6.6 per cent for 2007.

Howard Archer, economist for Global Insight, said: "Overall profitability was lifted significantly in the first quarter of 2008 by the net rate of return for oil and gas exploration companies soaring to 57.6 per cent from 51.3 per cent in the fourth quarter of 2007 and 23.9 per cent a year earlier.

"This was clearly boosted by soaring oil prices."

Mr Archer added the "impressively resilient" profitability figures represented a "last hurrah" before slowing growth and increasingly squeezed margins took their toll on businesses.

Yesterday, a survey of the financial services sector from the CBI and PricewaterhouseCoopers revealed the impact of the credit crunch on the finance industry, with profitability falling at a record pace.

A balance of 44 per cent reported a fall, compared with 18 per cent in March, the fastest rate of decline in profitability since the survey began in late 1989, and another heavy fall is anticipated over the next quarter.