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Financial Times: Shell’s profits rise despite fall in production


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Shell’s profits rise despite fall in productionBy Helen Thomas
Published: May 4 2006 08:38 | Last updated: May 4 2006 08:38

ShellThe impact of last year’s hurricanes and civil disturbances in Nigeria hit Royal Dutch Shell’s production, the oil major said on Thursday, but high oil and gas prices still boosted profit in the first quarter of 2006.

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Shell’s earnings on a current cost of supply basis – the industry standard which excludes changes in inventory values – rose 12 per cent to $6.1bn (£3.3), ahead of consensus forecasts at $5.6bn.

But production at Europe’s second largest oil company fell 3 per cent in the quarter, to 3.75m barrels of oil equivalent (boe) per day as attacks by militants in Nigera prompted a partial shut-down in the country and the effect of last year’s hurricanes deferred production in the Gulf of Mexico.

Shell said that it was losing 165,000 boe per day at the end of the quarter because of the problems in Nigeria. In the Gulf of Mexico, the company expects the Mars platform to start production in May significantly reducing the drag on Shell’s production compared to 2005 in the second quarter.

Soaring oil and gas prices outweighed the lower production volumes. Profit in exploration and production rose 27 per cent to $3.7bn.

The numbers compare with a 4 per cent fall in BP’s profit excluding changes in inventory, reported last week, and a 1.6 per cent fall in production during the first three months of the year.

Jeroen van der Veer, Shell’s chief executive, said: “our overall performance was satisfactory despite a series of operational challenges in the quarter, created by external factors.”

Shares in Shell were down slightly in early London trade to £18.58, from £18.60 at close on Wednesday.

Shell announced a first quarter dividend of €0.25 per share, up 9 per cent on 2005.

? Total, the French energy company, also benefited from the near record prices for oil and gas during the first quarter.

Earnings rose 16 per cent to €3.38bn ($4.06bn) despite a fall in income from Total’s downstream business and in chemicals, which suffered as raw materials costs rose.

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