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The Globe & Mail: Imperial, Shell fall short, say analysts

The Globe & Mail: Imperial, Shell fall short, say analysts

By DAVE EBNER

Friday, July 23, 2004 – Page B2

Shell Canada Ltd. increased its dividend 14 per cent yesterday — the second hike in the past year — as it reported a big jump in second-quarter profit, fuelled by increased production at an oil sands venture where it has a majority stake.

Rival Imperial Oil Ltd. reported a lower quarterly profit compared with last year but said that with the exclusion of unusual items in the year-ago period, profit in the April-June period actually rose.

Both companies’ profit fell short of analysts’ expectations. BMO Nesbitt Burns Inc. described Shell and Imperial’s numbers as “weak,” and stock of the companies fell by about a percentage point apiece.

Calgary-based Shell reported profit of $285-million or $1.03 a share in the quarter ended June 30, up 62.9 per cent from $175-million or 63 cents a year earlier but lower than the consensus among analysts of $1.23. Sales rose 27.5 per cent to $2.64-billion from $2.07-billion.

Shell said it will raise its dividend to 25 cents a share, up from 22 cents. It was raised from 20 cents late last year. Shell stock, which closed down 61 cents at $65.18 on the Toronto Stock Exchange, yields 1.54 per cent with the higher dividend, up from 1.35 per cent.

The shares reached a record high close of $66.05 on Tuesday and are up 6.4 per cent this year.

Linda Cook, Shell’s outgoing president and chief executive officer, said in a statement that there has been “steady progress” in the oil sands. At its 60-per-cent-owned Athabasca Oil Sands Project, profit was $96-million, a reversal from a loss of $68-million last year.

Late yesterday, Shell said it had purchased two oil sands leases from EnCana Corp. Financial details were not disclosed. One lease, Shell said, could support a mine producing as much as 100,000 barrels of oil a day. The company said it is still unclear whether the second lease can support a mine.

Profit at Toronto-based Imperial fell 11.7 per cent to $454-million or $1.26 a share from $514-million or $1.38 last year. Analysts had predicted a share profit of $1.38.

Excluding tax benefits of $110-million and foreign exchange gains of $55-million last year, Imperial profit rose by nearly a third. In a statement, president and CEO Tim Hearn said the result reflects “favourable market conditions and solid operating performance.”

Imperial sales rose 21.3 per cent to $5.47-billion from $4.51-billion.

Imperial shares fell 63 cents to $62.73 on the TSX, still near the March 1 record-high close of $64. The stock is up 9 per cent this year.

Sales at both companies benefited from higher energy prices in the second quarter compared with last year, particularly for crude oil which hit a record high of $42.33 (U.S.) on June 1. The benchmark oil price in the quarter on the New York Mercantile Exchange averaged $38.28, up 32.5 per cent from an average of $28.89 in last year’s second quarter.

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