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Shell’s Net Jumps 35% On High Oil Prices

THE WALL STREET JOURNAL: Shell’s Net Jumps 35% On High Oil Prices



July 28, 2005 10:37 a.m.

LONDON — Royal Dutch Shell Group PLC posted a 35% rise in net profit for the second quarter, buoyed mainly by high oil prices.

It was the first time the Anglo-Dutch oil giant reported earnings as a single company after unifying its twin parents, Shell Transport & Trading and Royal Dutch Petroleum, last week.

Shell, the world’s third-largest publicly traded oil company by market capitalization, said net profit rose to $5.46 billion for the three months ended June 30 from $4.05 billion a year earlier. The latest quarter’s results included charges totaling $545 million, compared to $573 million in charges for the year-earlier quarter, mostly from the fluctuating value of unrealized gas contracts in Britain and net tax charges.

The profit figure was slightly behind market expectations. Analysts surveyed by Dow Jones Newswires had forecast profit of $5.51 billion.

Revenue jumped 33% to $82.64 billion from $62.13 billion.

Shell, still recovering from a scandal over the downsizing of its oil reserves, also said it will boost spending on exploration to an annual $1.8 billion in 2005 and 2006.

Adjusted earnings on a current cost of supplies basis — an earnings measurement that strips out the fluctuating value of Shell’s oil and gas inventories — rose 26% to $4.63 billion from $3.66 billion.

Shell maintained its profit and oil production outlook for the 2005, saying it expects between $3 billion and $5 billion in surplus cash.

The charges in the latest quarter included a $270 million charge related to variations in valuation of unrealized U.K. gas contracts — due to accounting changes — and net tax charges; $226 million in gas and power, mainly for the divestment of power generation assets held through joint-venture company InterGen; and a $90 million settlement with U.S. pension holders following the energy reserves accounting scandal last year.

“Our good earnings and cash generation can be used for dividends, investments and share buybacks,” Chief Executive Jeroen van der Veer said in a statement.

Shell’s profit got a boost from a 46% annual rise in oil prices during the second quarter, which averaged $51.63 a barrel for benchmark North Sea Brent crude compared with $35.32 a barrel one year earlier.

By comparison, Shell’s rival BP PLC Tuesday reported a quarterly net profit up 29% from a year earlier, after being hit by a $700 million settlement charge tied to a deadly Texas refinery blast. BP is the world’s second-largest oil company by market capitalization after Exxon Mobil Corp. — which is also reporting Thursday — and ahead of Shell.

All Royal Dutch Shell numbers used International Financial Reporting Standards, which differ from U.S. Generally Accepted Accounting Principles.

It is the first time the Anglo-Dutch oil giant reports earnings as a single company, after unifying its Shell Transport & Trading and Royal Dutch Petroleum entities last week into a single stock.

Oil and gas production fell to 3.526 million barrels of oil equivalent a day, from 3.578 million barrels a day one year earlier.

Mr. Van der Veer said, “Upstream production was slightly above our expectations.” The company previously said it expected its production in the lower range of its 3.5 million to 3.8 million barrels a day forecast for 2005.

In morning trading, “A” shares in Royal Dutch Shell PLC were down 1.4%, or 25 pence, on the day at 1,709 pence in London.

–The Associated Press contributed to this article.

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