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Surging oil price boosts Shell

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Surging oil price boosts Shell

By Amanda Vermeulen

Published: July 31 2008 09:02 | Last updated: July 31 2008 09:02

The dramatic rise in the oil price in the last six months helped Royal Dutch Shellto report post healthy increases in earnings and dividends in the second quarter of its 2008 financial year.

Using current cost of supplies (CCS), which adjusts for changes in inventory values, Shell on Thursday reported earnings of $7.9bn (£3.9bn) compared with $7.6bn for the year-ago period.

Basic earnings per share grew 7 per cent to $1.28, while the second quarter dividend of 40 cents came in 11 per cent higher than last year.

On a ‘clean’ CCS basis – after an accounting adjustment to reflect commodity price effects during the period – second-quarter earnings came to $ 8.6bn, 24 per cent higher than the same quarter of 2007.

However, continued pressure on refining margins led to a sharp drop at the group’s chemicals business, offsetting an otherwise strong operating performance.

Jeroen van der Veer, Shell chief executive, reiterated comments made earlier this year that the oil major would make significant investments to grow the group, and to ensure that energy markets remained well supplied.

During the second quarter, Shell announced that its Canadian subsidiary had launched an offer to buy the shares it did not already own in Duvernay Oil for C$5.9bn, including that company’s debt. The deal is awaiting regulatory approval.

Total acquisitions this year would cost around $10bn, Shell said.

Net capital investment will range between £35-36bn, the largest in the oil industry. The planned outlay on new and existing assets is nearly 50 per cent more than that in 2007.

Shell has more than 50 major international projects under construction, with at least six expected to go onstream in the next 18 months. These projects would increase Shell’s global production by more than 250,000 barrels of oil per day and 3.6m tonnes of liquefied natural gas annually.

Mr Van der Veer said the planned spending was part of a strategy to increase new acreage and selective acquisitions as the group continued to refresh its portfolio with new options for growth.

Analysts at Cazenove noted that the background to the results, which had seen record oil prices, had played a very supportive role in the second quarter numbers.

Shell’s performance had reinforced the “positive earnings surprise trend” which had also seen 12 per cent growth from BP earlier this week, a 3 per cent improvement from BG Group, and ConocoPhillips trailing with a 1 per cent rise.

Shares in Shell opened firmer in London, gaining 1.8 per cent to £18.70.

EDITOR’S CHOICE

In depth: Oil – Apr-29

Shell in C$5.9bn Canada gas deal – Jul-14

Copyright The Financial Times Limited 2008

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