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Daily Mail: Shell still behind despite rival’s woes: beneath the surface not all is well with Shell

By Sam Fleming
Friday 4 May 2007

ROYAL Dutch Shell’s Peter Voser repeatedly refused to comment on the turmoil afflicting his closest rival as he unveiled his firm’s first-quarter earnings yesterday.

‘I am not qualified to give advice to BP,’ the finance director tersely told reporters on a conference call.

But the contrast between the two companies’ recent fortunes is stark.

Shell has beaten analysts’ earnings expectations for the past five quarters in a row.

Yesterday the Anglo-Dutch firm reported a 14pc jump in first-quarter profit to £3.5bn, thanks to higher oil refining margins.

The shares jumped 34p to 1804p, trimming their 12-month decline to 2.7pc.

Citigroup thinks it may have ‘structurally underestimated’ the amount of cash Shell’s assets are capable of spinning out.

The company’s heavy exposure to refining is proving a boon.

Still, the shares trade at an llpc discount to BP even after recent strong performance.

But beneath the surface not all is well with Shell.

The earnings were boosted by a surprise drop in the tax rate to 35pc from 43pc, as well as one-time investment gains.

Voser guided the market to expect output at the lower end of its 3.3m to 3.5m barrels a day range for 2007.

Profits at Shell’s exploration and production unit fell during the period as first-quarter output of oil and gas dropped 6.3pc.

As highlighted by last year’s stand-off with Russia over the Sakhalin-2 project, Shell is reliant on costly, high-risk mega-projects in perilous regions.

Nigeria, a key territory, remains plagued by civil unrest in the Delta region and the firm is struggling to ramp up output.

Even in calmer Canada there are worries about huge cost overruns.

Some analysts argue that despite Shell’s recent comeback, BP remains better placed because it built up a stronger reserve base earlier in the decade.

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