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Financial Times: Shell slides 8% but beats market forecasts

By Dino Mahtani
Published: October 25 2007 08:25 | Last updated: October 25 2007 08:25

Royal Dutch Shell, Europe’s biggest oil company, on Thursday said third-quarter current cost of supply earnings, an industry measure of underlying profit, fell 8 per cent to $6.39bn (£3.12bn, €4.48bn) on the back of lower refining margins and sales volumes.

However, record high oil prices meant that profit attributable to shareholders rose by 16 per cent to $6.916bn.

Exploration and production revenues fell to $3.51bn, from $3.74bn in the year-ago period, hit by lower volumes, higher tax charges and higher costs.

Third-quarter production slipped to 3.14m barrels of oil equivalent a day, from 3.25m boe/d a year ago.

Gas and power earnings were $568m, down from $781m a year ago, due to lower marketing and trading results and a planned shutdown of the Bintulu gas to liquids plant in Malaysia.

Downstream earnings also fell, to $1.65bn from $2.16bn a year, ago mainly due to lower refining margins. Refinery processing intake was down 1 per cent to 3.89m b/d.

Jeroen van der Veer, Shell’s chief executive said: “Given the weaker industry refining margins we have seen in the quarter, these are satisfactory results”.

The figures were ahead of analysts’ forecasts and Shell’s ‘A’ shares rose 14p to £20.70 in early London trading. The shares have gained 15 per cent this year. Analysts had on average been expecting current cost of supply net profit, excluding non-operating items, of $5.52bn, according to a Reuters poll of nine analysts.

Shell expects to revive production from various projects including another gas to liquids plant in Qatar and Canadian oil sands projects. It said in September that it would spend $7bn with Saudi Arabia to expand refinery capacity in what would be the biggest refinery expansion in three decades.

But the company is expected to lose some of its reserves this year after Gazprom, the Russian state owned company, completed its purchase of a majority stake in the Sakhalin-2 oil and gas project in Russia.

While the company in Nigeria has lifted a force majeure – an emergency clause allowing it cancel its contractual obligations to supply oil – almost two years after militants shut down 500,000 barrels per day of production, it is still vulnerable to attack. Just days ago, militants in Nigeria again raided one of the offshore platforms originally affected.

Nine-month current cost of supply earnings were up 8 per cent over the equivalent period last year, at $20.88bn. Diluted earnings per share rose to $3.63, from $3.12.

The quarterly dividend rises 14 per cent to 36 cents. Shell bought back $1.5bn, or 0.6 per cent of its shares for cancellation during the quarter.

Copyright The Financial Times Limited 2007

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