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Green groups call for windfall tax as Shell reports record earnings

The Independent: Green groups call for windfall tax as Shell reports record earnings

“Shell’s fortunes this year, on the back of soaring oil prices, are in marked contrast to last year when it was embroiled in a reserves reporting scandal that plunged into one of the worst periods in its long history. The scandal cost Sir Philip Watts his job as chairman and the company was ordered to pay fines of $120m in the US and £17m in the UK. The company agreed to pay $90m in damages to US employee shareholders who brought a class action lawsuit against the oil giant.”

Friday 28 October 2005

By Damian Reece, City Editor

Royal Dutch Shell is facing calls for a windfall tax on oil companies’ profits after announcing a 68 per cent increase in third-quarter earnings to $7.4bn (£4.1bn).

A record quarter for oil prices helped Shell deliver results that beat City expectations but prompted the ire of environmental groups and politicians.

Shareholders will benefit from Shell’s performance to the tune of $15bn, which the company is returning to investors this year in the form of share buy-backs and increased dividends. Jeroen van der Veer, the chief executive, said: “Our operational performance is paying off with good results.”

The US Energy Secretary, Sam Bodman, said oil companies such as Shell and Exxon Mobil – which also announced record profits yesterday – should react to rocketing oil prices by improving their supply.Mr Bodman told the Senate’s energy committee: “These companies are turning in record profits. They have a responsibility to expand refining capacity.”

Exxon Mobil said its quarterly profits ballooned by 75 per cent to $10bn. Shell said its record financial results included the costs of the recent US hurricanes in the Gulf of Mexico which were expected to land it with a $350m bill, although most of this is insured.

Environmental campaigners used the Shell results to pressure the Government into levying a windfall tax on oil companies, which it said were making money from the deteriorating climate of the planet.

Craig Bennett, a campaigner with Friends of the Earth, said: “Shell is profiting from climate change, profiting from pollution and damaging the lives of communities around the world. This is simply unacceptable for a company that claims to be responsible. The Government must not sit back and let this happen. It must curb oil company profits, but also demand higher standards from UK companies operating overseas.”

The stock market shrugged off concerns that the Treasury may impose a one-off tax on Shell and BP. Shell shares rose up to 1.8 per cent during the day, finishing 0.5 per cent higher at 1,702p.

Shell’s fortunes this year, on the back of soaring oil prices, are in marked contrast to last year when it was embroiled in a reserves reporting scandal that plunged into one of the worst periods in its long history. The scandal cost Sir Philip Watts his job as chairman and the company was ordered to pay fines of $120m in the US and £17m in the UK. The company agreed to pay $90m in damages to US employee shareholders who brought a class action lawsuit against the oil giant.

Shell was able to put further distance between itself and last year’s scandal yesterday with results showing that it had generated $10.5bn of cash from its operations during the third quarter, an increase of 34 per cent. The company is pumping 3.5 million barrels a day, which it said will increase only marginally next year, dashing hopes of any significant increase in supply in 2006.

Earnings per share from the company in the quarter rose 69 per cent to $1.35 compared with a year ago.

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