The Wall Street Journal: Shell Profit Rises; Revenue Drops

Refining, Chemicals
Record Higher Margins
Offsetting Weak Output
By BENOÎT FAUCON
May 4, 2007; Page B5

LONDON — Royal Dutch Shell PLC said first-quarter net profit rose 5.6%, as higher refining and chemical margins more than offset the continued impact of Nigerian unrest and lower oil prices.

The rising profit underscores the merits of being an integrated oil major, as refining and chemical margins make up for lower crude-oil output and prices. The trend was also apparent in quarterly results from Chevron Corp. and Exxon Mobil Corp.
 
Shell, the world’s second-largest nongovernment-controlled oil company by market capitalization after Exxon Mobil, said net income rose to $7.28 billion from $6.89 billion a year earlier. Revenue fell 3.3% to $73.48 billion from $75.96 billion.

The latest results were also buoyed by a net gain of $371 million, largely related to proceeds on the sale of some of the equity portfolio held by Shell insurance companies. The gain compared with a net gain of $113 million in the year-earlier period.

In London trading yesterday, Shell shares gained 1.6% to £18.36 ($36.52), up 29 pence. In 4 p.m. composite trading on the New York Stock Exchange, Shell’s American depositary shares gained 76 cents to $71.45.

KBC Peel Hunt analyst Tony Alves said the earnings looked like “a good set of results,” adding, “It seems to be a company on the turn.”

Shell’s earnings from finding oil and natural gas and pulling it out of the ground fell to $3.51 billion from $3.74 billion on lower prices and output for crude oil and natural gas. The price of the U.K. benchmark Brent crude-oil contract was down 7% on average to $58 a barrel in the quarter compared with a year earlier.

Average quarterly output declined 6.3% to 3.51 million barrels of oil equivalent a day, largely because of the continuing impact of unrest in the Niger Delta by rebel groups seeking a larger share of oil profits.

Chief Financial Officer Peter Voser said that Shell hopes to soon resume operations at its Niger Delta Forcados terminal but that loading would come from stored crude, not current production.

By contrast, the first-quarter profit from processing crude oil into products such as gasoline and then selling them was $1.49 billion, up from $1.33 billion a year earlier.

–Alex MacDonald contributed to this article.

Write to Benoît Faucon at [email protected]

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