• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Shell Banks Earnings of GBP45m a Day High Oil Prices Offset Hurricane Damage During Third Quarter

Posted on: Friday, 28 October 2005, 06:00 CDT

By BEN GRIFFITHS

ANGLO-Dutch oil company Royal Dutch Shell has trumped arch-rival BP by announcing record profits equivalent to GBP45m a day, as high oil prices offset extensive hurricane damage during the third quarter.

Shell is one of the largest producers in the Gulf of Mexico area of the United States which was battered by the severe weather that slammed through coastal areas of Louisiana and Mississippi and flooded key oil facilities and refining plants.

Shell revealed it would be hit with total expenses of dollars- 350m (GBP195m) during 2005 and 2006 as a result of hurricanes Rita and Katrina, adding that insurance cover should be available for a significant proportion of the costs.

In its third-quarter trading update, Shell said the current cost of supply earnings rose to dollars-7.37bn in the three months to September 30. That was up 68-per cent compared with the same time last year but fell to dollars-5.8bn once one-off gains from the sale of assets were stripped out.

The figures topped those reported by BP earlier this week, which said its profits rose 16-per cent on the year to dollars-4.4bn or around GBP30m a day. All oil firms have benefited from the sky-high global price of crude, which topped dollars-70 a barrel and saw UK petrol prices rise above GBP1 a litre this summer.

Jeroen van der Veer, chief executive, said: "We have all seen in this past few months a quite volatile period. We have in this business created value not only in view of today and tomorrow but also in the long term."

Even if production had not been disrupted by the hurricanes, Shell conceded that it would have failed to match its output for last year.

Shell said production would have been 4-per cent lower over the summer as new volumes were more than offset by fields yielding less oil and gas and North Sea rigs being shut down for maintenance.

Although daily output of 3.21 million barrels was down on last year, Shell said higher oil and gas prices meant earnings from its exploration and production division more than doubled to dollars- 4.98bn in the third quarter.

Peter Voser, chief financial officer, said Shell's people in the Gulf of Mexico had done an "extraordinary job" under the most challenging conditions to restore operations following Rita and Katrina.

Shell's upstream production has been restored to around 200,000 barrels of oil a day compared with the 450,000 mark before the hurricanes. An additional 150,000 barrels a day of capacity that had been shut by hurricanes will return to production during the fourth quarter of this year, Voser added, around 80,000 barrels higher than Shell's previous guidance.

However, the company's Mars production platform in the Gulf will not resume normal operations until the second half of 2006, having suffered significant damage during the storms.

During the three-month period Shell also raised dollars-1.77bn from the sale of its stake in Dutch gas distributor Gasunie and other transactions, helping it hit its target of selling off between dollars-12bn and dollars-15bn of assets earlier than expected.

Tony Shepard, an analyst at broker Charles Stanley, noted the huge sum that Shell had raised from disposals so far this year and that no plans to return the cash to shareholders were set out in the results statement.

This invited speculation that the firm was gearing up for an acquisition next year, he said.

In 2004 Shell stunned world financial markets by announcing it had overstated its oil and gas reserves, an admission that sent its shares plummeting and claimed the scalps of three top executives. The company has been working hard to find new oil fields to replace its longerterm production assets supplies.

FACT FILE

2005 2004

INCOME GBP9.03bn GBP5.37bn

PROFIT GBP7.37bn GBP4.38bn

DIVIDEND 0.23 n/a

Third-quarter figures

Source: Herald, The; Glasgow (UK)

More News in this Category