By THE ASSOCIATED PRESS
Published: October 26, 2007
AMSTERDAM, Oct. 25 (AP) — Royal Dutch Shell said Thursday that third-quarter net profit rose 16 percent despite a drop in production, but it warned that the underlying performance of its refining operations was weaker than it appeared.
Net profit at Shell, Europe’s largest oil company, came to $6.92 billion, up from $5.94 billion, primarily because of a rise in the reported refining earnings. Sales rose to $90.7 billion in the quarter from $84.3 billion.
The company had net gains in the third quarter of $265 million from asset sales and a windfall from a tax change in Germany, versus charges of $77 million a year ago. Refining earnings were $2.15 billion, up more than 70 percent from a year ago. However, Shell said that numbers this year looked better than the reality. The company said oil prices had risen between the time the oil was pumped out and when it was refined, inflating refining earnings — and the opposite was true a year ago.
Adjusting for the price shift, refining earnings on a comparable basis fell 24 percent, to $1.65 billion, Shell said. Using those numbers, which are not permitted under official accounting but are preferred by industry analysts, Shell’s earnings would have fallen around 6 percent.
Still, that was better than the performance of some of Shell’s major rivals. BP reported a 29 percent drop in earnings, to $4.4 billion, on Tuesday, mostly because of problems at refineries. ConocoPhillips reported a 5 percent drop in profits, to $3.67 billion, on Wednesday.
“Given the weaker industry refining margins we have seen in the quarter, these are satisfactory results,” Shell’s chief executive, Jeroen van der Veer, said in a statement. Shell’s shares fell 1.45 percent, to close at 29.45 euros ($41.95) in Amsterdam.
The company’s production of oil and gas fell 3.4 percent from 3.25 million barrels of oil or equivalents per day to 3.14 million.
Production earnings were still near record highs because of the price of crude oil. Shell’s selling prices were above $70 a barrel in the quarter, up from around $65. Brent crude was trading above $85 a barrel Thursday.
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