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Shell and BP investors get $5bn payout

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Soaring oil prices have boosted Shell and BP’s earnings

Daily Telegraph: Shell and BP investors get $5bn payout

By Russell Hotten
Last Updated: 1:20am BST 30/04/2008

A surging oil price has showered investors with a $5bn (£2.5bn) bonanza earned in just 12 weeks, with further payouts throughout the year expected to make 2008 a record for shareholders.

The dividend payouts announced yesterday on the back of bumper profits by Royal Dutch Shell and BP, Europe’s two biggest oil companies, will deliver much needed cheer to investors, both private individuals and the institutions that manage the country’s pension schemes including Legal & General and Standard Life.

The Government will also be a major beneficiary thanks to the soaring tax receipts it is earning from oil companies.

The two oil companies will together pay out the bumper dividends earned in the first three months of this year, which are among the largest quarterly payments ever made by London-listed businesses. Shell said yesterday that its investors will share $2.33bn, while BP will hand out $2.55bn.

The payments were announced after Shell reported Q1 profits up 12pc to $7.78bn (£3.92bn), and BP posted a 48pc rise to $6.59bn (£3.32bn). Soaring oil prices, which topped $100 a barrel during the quarter, have boosted the companies’ earnings from exploration and production.

Analysts predict that the continuing rise in the price of crude, now nudging $120 a barrel, will mean even bigger profits over the next three months. BP, 45pc of whose shares are held in the UK, paid $8.3bn in dividends for 2007, but could top this figure for 2008.

The $2bn BP paid in corporation tax and $10.5bn it collected for the Treasury in excise duties on petrol and VAT also looks set to be surpassed as the price of a gallon of petrol heads towards £5.

Anglo-Dutch Shell, 90pc of whose earnings are from outside the UK, paid the Treasury $1bn in corporation tax last year and $18.6bn globally. The company, which has 50pc of shareholders listed in the UK, estimated yesterday that it collected $78.6bn in excise duties on petrol and diesel for various governments around the world.

In January, Shell’s annual results statement for 2007 re-ignited calls for a windfall tax after the company announced profits of £14bn, a European record. But both firms said yesterday that they need the increased earnings to invest billions of pounds into new projects.

The world’s major oil companies are struggling to replenish their oil and gas reserves and are being forced to enter new and more expensive markets, like Canada’s tar sands.

BP’s and Shell’s profits were condemned yesterday by motoring organisations. The AA’s president, Edmund King, said drivers would be shocked to learn that the profits amount to £3.3m an hour for the first three months of 2008. “The motorist feels somewhat battered from all sides, seeing the oil companies going off with cash in their pockets and the Treasury filling its coffers.

BP’s production was unchanged at 3.91m barrels of oil equivalent per day. The company paid an average of almost $91 a barrel for its oil in the first quarter, up 70pc on the same period last year. In refining and marketing, there was an underlying drop in profits of 38pc to $640m. The dividend, at 6.83p a share, is up 31pc.

Shell also suffered a decline in refining and marketing, with earnings down 20pc to $1.19bn. Its quarterly dividend rises 11pc to 20.05p.

http://www.telegraph.co.uk/money/main.jhtml?view=DETAILS&grid=&xml=/money/2008/04/30/cnoil130.xml

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