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Shell’s Second-Quarter Net Gains on Record Crude

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Shell’s Second-Quarter Net Gains on Record Crude (Update1) 

By Fred Pals

July 31 (Bloomberg) — Royal Dutch Shell Plc, Europe’s biggest oil company, said second-quarter profit climbed 33 percent, boosted by record crude prices and higher natural gas.

Net income advanced to $11.56 billion from $8.67 billion a year earlier, The Hague-based company said today in a statement. Excluding inventory changes and one-time items, earnings missed analysts’ estimates.

Shell Chief Executive Officer Jeroen van der Veer plans to counter lost production in Nigeria and Russia by mining Canadian oil sands and developing a Qatari gas-to-liquids venture. U.S. oil futures climbed above $140 a barrel for the first time in June and natural-gas prices were 50 percent higher on the year.

“They benefited from this enormous surge in the oil price,” James Barty, head of macro strategy at Arrowgrass Capital Partners in London, said in an interview with Bloomberg Television yesterday. “At the end of the day, these guys are driven by the oil price.”

Excluding gains or losses from holding inventories and one- time items, profit was $7.83 billion. That missed the $8.3 billion median estimate of 11 analysts surveyed by Bloomberg.

Weaker output and oil’s 13 percent slide from an all-time high of $147.27 on July 11 have held back the shares.

Shell’s London-listed Class A shares closed yesterday at 1,837 pence and aredown 13 percent this year. That compares with a 17 percent decline for BP Plc, Europe’s second-biggest oil producer, which earlier this week posted a 28 percent increase in profit to $9.47 billion.

Exxon

Exxon Mobil Corp., the world’s biggest energy company, may later today report a 26 percent increase in net income to $12.9 billion, the highest ever for a U.S. company without one-time gains, according to the average of seven analyst estimates compiled by Bloomberg.

Of the 34 analysts tracked by Bloomberg who cover Shell, 22 recommend buying the shares, eight advise holding the stock and four say “sell.”

Shell’s output has fallen for the past five years as the company ceded a stake in Russia’s Sakhalin-2 venture and militant attacks in Nigeria kept fields offline.

The company lost about 160,000 barrels a day in production in Nigeria in the second quarter as militants attacked facilities and blew up pipelines. Shell suspended export obligations for its Bonny Light crude this week after the latest militant raid.

Duvernay Acquisition

Shell is turning to so-called unconventional projects to replace aging fields as high oil prices encourage energy-rich nations to hold onto a bigger slice of their resources.

Earlier this month, Shell agreed to buy Duvernay Oil Corp. for about C$5.9 billion ($5.8 billion), including assumption of debt, to expand gas output from hard-to-tap formations in western Canada.

Van der Veer said in June he expects to sign oil agreements with Iraq shortly. Iraq has been negotiating technical service contracts with Shell and other oil companies as it seeks to almost double crude output to 4 million barrels a day in the coming years.

Profit from turning crude into gasoline and diesel fell in the quarter as crude gains outpaced those of other fuels. Refining margins fell by half to $8.19 a barrel in the second quarter from $16.61 a year earlier, according to BP data.

((Shell will hold a Webcast presentation, starting at 2 p.m. London time. To register and listen go to http://www.shell.com/home/content/investor-en.

To contact the reporter on this story: Fred Pals in Amsterdam at[email protected]

Last Updated: July 31, 2008 02:16 EDT

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