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Bloomberg: Shell Net Climbs as Chemical, Refining Earnings Rise (Update1)

By Fred Pals and Stephen Voss

May 3 (Bloomberg) — Royal Dutch Shell Plc, Europe’s biggest oil company, said profit unexpectedly rose as it earned more from its chemicals division and from refining crude into gasoline and diesel.

Net income climbed to $7.28 billion in the first quarter from $6.89 billion in the year-earlier period, The Hague-based company said in a statement on its web site. Profit excluding certain one-time costs and gains was $6.6 billion. Analysts had estimated earnings of $5.61 billion on that basis, according to the median projection from a Bloomberg survey of nine analysts.

“These numbers are quite phenomenal,” said Jason Kenney, an analyst at ING Wholesale Banking in Edinburgh, who has a “hold” rating on the stock. “The real surprise was in the chemicals. Downstream also showed solid results.”

The company is the last of the world’s three-biggest oil companies to report results, after BP Plc last week said first- quarter profit slid 17 percent and Exxon Mobil Corp. said earnings rose 10 percent. Shell’s rise in refining margins more than offset lost output from attacks in Nigeria, where militants are demanding a greater share of surging oil revenue.

Shell’s oil and gas output, including oil sands, was 3.51 million barrels last quarter, down 6.3 percent from a year earlier.

The company’s Oil Products division, which handles the “downstream” business of oil refining, had a profit, excluding one-time items, of $1.49 billion, up 11.6 percent, while profit at the chemicals unit more than tripled to $480 million.

Lost Output

Shell’s London-traded A shares yesterday rose 32 pence, or 1.8 percent, to 1,770 pence. The stock is little changed this year. BP shares are also little changed, while Exxon Mobil is up 4.2 percent.

Since February 2006, Shell’s venture in Nigeria has halted output of 477,000 barrels a day, or about half of its average daily production. In March, it shut in an additional 187,000 barrels a day of supplies for about four weeks because of a pipeline leak in the Niger Delta.

Shell, the biggest foreign oil producer in Nigeria, plans to increase production to pre-February 2006 levels in the “coming months” after completing site inspections and following the presidential elections, Chief Executive Officer Jeroen Van der Veer told reporters on April 5.

Lower Prices

Profit at Shell’s exploration and production division fell because of declining oil and gas prices and production. U.K. natural gas prices in the first quarter were about a third of their year-earlier levels. Brent crude averaged $58.62 in the period, down 6.4 percent from the same quarter of 2006.

Shell has said it expects overall oil and gas production in 2007 to be in the range 3.3 million to 3.5 million barrels of oil equivalent per day, assuming some Nigerian output remains offline for the rest of the year.

Last year, Shell regained its position as Europe’s biggest oil company by market value, as BP faced Alaskan pipeline leaks and the aftermath of the Texas City, Texas, refinery blast.

On April 18, Shell closed Russia’s Sakhalin-2 transaction, selling half of its 55 percent stake in the natural gas export venture to OAO Gazprom for about $4.1 billion. While reducing its holding in Sakhalin, it bought a remaining 22 percent minority stake in Shell Canada for $7.5 billion.

Total SA, Europe’s third-largest oil company, is due to report earnings tomorrow.

To contact the reporter on this story: Fred Pals in Amsterdam at [email protected] ; Stephen Voss in London at [email protected]

Last Updated: May 3, 2007 02:39 EDT

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