Shell Makes GBP5.8bn Net in Second Quarter

By DOUGLAS HAMILTON

ROYAL Dutch Shell said yesterday that second-quarter net income gushed 33per cent higher to a record Dollar11.6bn (GBP5.8bn) on surging oil prices and the weak dollar. The figure for a year ago was Dollar8.67bn.

Shell’s underlying profit rose by 24per cent to Dollar8.6bn, after excluding Dollar750m in non-cash charges, beating an average forecast of Dollar8.3bn from City analysts.

“This is another set of competitive earnings for Shell shareholders, said chief executive Jeroen van der Veer. “Good operating performance, combined with increased oil and gas prices, offset the impact of weaker downstream conditions in the second quarter of 2008.

“Shell is making substantial, targeted investments to grow the company for shareholders and help ensure that energy markets remain well supplied.”

Shell’s “A” shares closed 38p cheaper at 1799p in London – a loss of 2per cent.

The company, based in the Dutch city of The Hague, said oil and gas production fell slightly to 3.126 million barrels of oil equivalent per day n the second quarter of 2008, from 3.178 million in the same quarter last year but the drop in output was not as severe as in some recent quarters.

Shell’s output has fallen for the past five years as the company ceded a stake in Russia’s Sakhalin-2 venture and attacks by anti- government rebels in Nigeria kept fields offline.

The company lost 195,000 barrels a day in production in Nigeria in the second quarter as militants attacked facilities and blew up pipelines, Van der Veer said. Shell suspended export obligations for its Bonny Light crude this week after the latest militant raid. As much as 220,000 barrels a day of Shell’s share of daily output is currently shut-in.

Shell is turning to “unconventional” projects to replace aging fields as high oil prices encourage energy-rich nations to hold on to a bigger slice of their resources.

Earlier this month, Shell agreed to buy Duvernay Oil for about CDollar5.9bn, including assumption of debt, to expand gas output from hard-to-tap oil sands formations in western Canada.

Shell said it planned to boost organic capital investment to Dollar30-Dollar31bn in 2008, from a planned Dollar28-Dollar29bn, because of rising costs and the weak dollar. It also expects to spend Dollar10bn on acquisitions.

The UK-Dutch oil major also claimed exploration success. “During the first half of 2008, Shell had four notable exploration discoveries in offshore Nigeria, Australia and Brunei and onshore USA, ” the company said.

Shell’s upstream oil and gas division was the main profit driver as oil prices almost doubled to more than Dollar120 in the quarter, before pressing ahead to a record high above Dollar147 on July 11.

However, analysts said most divisions performed in line with forecasts, with the exception of Shell’s gas division, which was “much better than expected”, according to a note from Fred Lucas, an oil analyst at brokers Cazenove.

Rival BP reported a 61per cent rise in underlying secondquarter profits on Tuesday. Several other big oil companies also announced results yesterday.

Exxon Mobil, the world’s largest publicly traded oil company, reported secondquarter earnings of Dollar11.68bn, the biggest quarterly profit ever by any US corporation, but the results fell well short of Wall Street estimates.

Spanish-owned Repsol-YPF said net income increased 11per cent in the second quarter to ?905m (about GBP700m) after rising oil prices boosted inventories. Eni of Italy posted a 52per cent jump in earnings to ?3.44bn.

Originally published by Newsquest Media Group.

(c) 2008 Herald, The; Glasgow (UK). Provided by ProQuest Information and Learning. All rights Reserved.