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Shell Reports Higher Earnings on Oil Prices

Jason Alden/Bloomberg: A Shell station in London, U.K. Shell posted adjusted earnings of $6.6 billion, matching the mean estimate of nine analysts surveyed by Bloomberg.

By Eduard Gismatullin – Jul 28, 2011 8:47 AM GMT+0100

Royal Dutch Shell Plc (RDSA), Europe’s biggest oil company, said second-quarter earnings almost doubled on higher oil prices and project startups in Qatar and Canada.

Net income rose to $8.66 billion from $4.39 billion a year earlier, The Hague-based Shell said today in a statement. Excluding one-time items and inventory changes, profit matched analyst estimates.

“The cash generation in the company was already quite strong and they proved it again this quarter,” said Dimitri Willems, who helps manage about 1.3 billion euros ($1.9 billion) at Kempen Capital Management in Amsterdam. Cash flow from operations rose 43 percent to $12.3 billion.

Chief Executive Officer Peter Voser, who sold about $4 billion of “non-core” assets in the first half, is seeking to boost production with a $100 billion investment plan through 2014. Shell started the Pearl gas-to-liquids and Qatargas 4 liquefied natural-gas ventures in the Middle East this year. It also expanded an oil-sands project in Canada’s Alberta region.

“The first half of 2011 saw the successful startup of three of the largest-scale projects anywhere in our industry today,” Voser said in the statement. “The ramp-up of our new projects should drive our financial performance in the coming quarters.”

Statoil, Repsol

BP Plc (BP/), Shell’s smaller rival, earlier this week reported profit that missed analyst estimates following field disruptions in the Gulf of Mexico. Statoil ASA, Norway’s largest oil company, and Repsol YPF SA of Spain both reported earnings today that beat estimates. Exxon Mobil Corp. (XOM), the largest U.S. oil company, is scheduled to release earnings later today.

Adjusted earnings at Shell came in at $6.6 billion, in line with the mean estimate of nine analysts surveyed by Bloomberg.

Shell’s Class A shares traded in London fell 0.5 percent to 2,253 pence as of 8:20 a.m. local time. The stock is up 5.3 percent this year.

The startups in Qatar and Canada will contribute in excess of 400,000 barrels of oil equivalent a day at their peak, according to Voser.

Shell carried out work at its refineries in Canada, the U.S., the Netherlands, Malaysia and Singapore this year. As a result, refining availability fell to 90 percent in the second quarter from 94 percent last year.

‘Resilient Performance’

“Maintenance activities and weak industry refining margins masked a resilient performance from oil products marketing and chemicals,” the CEO said.

Production fell 2 percent to 3.046 million barrels of oil equivalent a day in the quarter, mainly because of asset sales. Shell plans to increase daily output to 3.7 million barrels in 2014. LNG sales rose 24 percent to 4.8 million tons in the latest quarter.

Brent crude futures, the benchmark for two-thirds of the world’s crude, were on average 48 percent higher in the second quarter compared with the year-earlier period. U.K. natural-gas prices were 58 percent higher.

In Mexico, Shell agreed to sell its 50 percent stake in an LNG import terminal at Altamira for about $200 million. It also completed the disposal of assets in Chile and the Dominican Republic for about $700 million in total.

Prelude Floating LNG

Shell is expanding in Australia after agreeing in May to invest as much as $12.6 billion in the Prelude floating LNG project. Earlier this month, it agreed to join Japan’s Inpex Corp. in a floating LNG project off Indonesia.

In the Gulf of Mexico, Shell started the Cardamom field development last month. In May, the company warned that its oil and gas production may be curbed by 50,000 barrels a day in the Gulf because of delays in receiving drilling permits following the Macondo crude spill last year.

Shell completed a $1.8 billion Texas gas field sale to Occidental Petroleum Corp. this year and also disposed of stakes in Canada, Pakistan and the U.K. This month it agreed to sell assets in Brazil.

Last month, Shell concluded the creation of a $12 billion biofuel joint venture with Cosan SA Industria & Comercio in Brazil. The partners plan to make transport fuel from wheat stalks and sugar-cane bagasse, a sugar industry waste product, in anticipation that the share of renewable energy in fuel will double in the next 10 years.

In Malaysia, Shell together with ConocoPhillips and Petroliam Nasional Bhd. agreed to invest in the offshore Sabah Gas Kebabangan project, which will pump 130,000 barrels of oil equivalent a day.

To contact the reporter on this story: Eduard Gismatullin in London at [email protected]

To contact the editor responsible for this story: Will Kennedy at [email protected]


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