The Times: Shell breaks profit record

By Bryce Elder and agencies
Shell announced record profits for a quoted UK company, with the oil giant reporting earnings of $22.94 billion (£12.93 billion).
The figure — which works out at nearly £1.5 million an hour — was up almost a third on last year’s profit of $17.59 billion. It is equivalent to just over 1 per cent of Britain’s gross domestic product, or the entire GDP of Sudan.
The group said it expected to use some of the windfall to return up to $5 billion to investors through share buybacks in 2006.
The record number comes for a year when oil prices rose from around $45 a barrel to reach a record of $70.85 on Aug. 30, a day after Hurricane Katrina struck the Gulf of Mexico and damaged production facilities.
The bulk of Shell’s profits come from its “upstream” business – getting oil and gas out of the ground. This division has been boosted by the spiralling cost of crude oil, which came as tensions over the safety of supplies from oil-producing countries and the damaging hurricane season.
But the storms also disrupted Shell’s production, shutting refineries temporarily and forcing it to invest on repairs. Production fell to 3.5 million barrels a day during the final quarter, down from an equivalent figure of 3.8 million barrels last time.
Chief executive Jeroen van der Veer said: “Our good performance in the fourth quarter of 2005 gives us a solid platform to build on in 2006.”
For the final quarter of 2005, Shell said profit rose 3 per cent to $5.395 billion on a current cost of supply (CCS) basis. That matched City expectations, which were centred at around $5.385 billion.
Shell's results come in the same week that Exxon Mobil, the world’s largest oil company, revealed $33.86 billion profits in its last financial year — the biggest so far in corporate history. That result beat investor expectations.
Jaap Barendregt, an analyst at FBS Bankiers, told Reuters that Shell’s results “are as expected, but the result in itself is a bit disappointing. We could have expected somewhat more given the surprise we saw with Exxon.”
In early deals on the London Stock Exchange, shares of Shell were down 34p to £19.71. They are up about 60 per cent over the last year.
BP is expected to continue the trend of record profits next week by revealing full-year profits estimated at $21.7 billion. This contrasts with earnings of $16.4 billion in 2004.
Oil-company profits, driven by the surging price of oil and gas, have drawn criticism as the cost of petrol remains high and domestic-heating bills soar.
Gordon Brown increased taxes on oil companies in his pre-budget statement in November. The tax rise, which came into effect this month, has already caused Shell to scale back its plans for exploration in the North Sea.
The bumper profits enjoyed by big British companies have caused several political outcries in recent years, especially those posted by Vodafone and HSBC.
In November American oil firms were forced to justify their bulging third-quarter profits to Congress, where they tried to dissuade the US government from imposing a windfall tax on their gains. Exxon has long been a focal point for criticism, not least because the $34 billion in its coffers could pay for the construction of more than a dozen refineries.

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