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Shell Q2 Profits Hits $7.32 Billion, Commits to Nigeria
8 Aug 2006
Author: Hector Igbikiowubowith
Country: Nigeria

ROYAL Dutch Shell PLC, Europe's second-largest oil company, reported a 40 percent increase in second-quarter earnings Thursday as high oil prices offset production difficulties in Nigeria and the Gulf of Mexico.

The company's management has also said it remains committed to developing its projects in Nigeria despite attacks from militants which shut in an extra 180,000 barrels of crude oil per day, raising the company's total shut in Nigeria output to 635,000 barrels per day.

Net profit rose to $7.32 billion from $5.24 billion a year earlier. Sales rose less than 1 percent to $83.1 billion from $82.6 billion.

Chief Executive Jeroen van der Veer said in a statement the earnings were "underpinned by overall good operational performance and not simply high energy prices."

Still, the main reason for the increase was higher oil prices, with earnings at Shell's oil exploration and production arm leaping to $4.0 billion from $2.75 billion, despite an 8 percent drop in production to 3.25 million barrels a day.

Prices for benchmark North Sea Brent crude averaged $69.51 a barrel in the quarter, compared with $51.65 a barrel a year earlier.

That was in line with other major oil companies reporting results this week. BP PLC said its second-quarter profits rose 30 percent to $7.3 billion, while ConocoPhillips saw a 65 percent increase to $5.18 billion. Exxon Mobil Corp., the world's largest publicly traded oil company, is due to report later Thursday.

Shell said that excluding the damage caused by militant attacks on its operations in Nigeria and the fallout from hurricanes Katrina and Rita in the Gulf of Mexico, production would have been flat.

Shell is missing around 180,000 barrels per day in Nigeria because of recent attacks, and said Thursday it couldn't confidently predict when production will resume.

Van der Veer said that despite a pipeline rupture this week, possibly due to an attack by militants, the company has no intention of scaling back operations in the West African nation. "We are not afraid to invest in Nigeria," he said.

The Niger Delta region has been the scene of frequent disputes for years between oil companies and communities that demand a greater share of the wealth of Africa's largest crude producer. At least 31 expatriate workers have been held hostage by a variety of militant groups so far this year.

Shell's results Thursday beat earnings estimates compiled by Dow Jones, which had predicted a 17 percent rise in earnings, helped by strong refining margins. Shares rose 1.9 percent to euro27.89 ($35.22) in Amsterdam trading.

At Shell's second-biggest division, which refines oil and sells it to consumers at the pump, profits increased 13 percent to $3.02 billion.

"Higher earnings due to stronger refining margins particularly in the United States, and increased trading profits from a positive trading environment were partially offset by the impact of lower retail marketing margins and reduced refinery utilization mainly in Europe," Shell said.

Shell's 2004-2005 accounting scandal, in which it was forced to repeatedly reduce the size of its proven oil reserves, continued to affect the company's earnings and prospects.

The company said Thursday it had reserved $500 million in the second quarter to pay shareholder class action lawsuits.

Shell has also been spending heavily to restore reserves, planning investments of $19 billion in 2006, and $21 billion in 2007, most of it in exploration and production.

But in 2005, the company pumped more oil than it added to proven reserves, and in Shell's 2005 annual report the proven reserves stood at around 11.5 billion barrels.

ROYAL Dutch Shell PLC, Europe's second-largest oil company, reported a 40 percent increase in second-quarter earnings Thursday as high oil prices offset production difficulties in Nigeria and the Gulf of Mexico.

The company's management has also said it remains committed to developing its projects in Nigeria despite attacks from militants which shut in an extra 180,000 barrels of crude oil per day, raising the company's total shut in Nigeria output to 635,000 barrels per day.

Net profit rose to $7.32 billion from $5.24 billion a year earlier. Sales rose less than 1 percent to $83.1 billion from $82.6 billion.

Chief Executive Jeroen van der Veer said in a statement the earnings were "underpinned by overall good operational performance and not simply high energy prices."

Still, the main reason for the increase was higher oil prices, with earnings at Shell's oil exploration and production arm leaping to $4.0 billion from $2.75 billion, despite an 8 percent drop in production to 3.25 million barrels a day.

Prices for benchmark North Sea Brent crude averaged $69.51 a barrel in the quarter, compared with $51.65 a barrel a year earlier.

That was in line with other major oil companies reporting results this week. BP PLC said its second-quarter profits rose 30 percent to $7.3 billion, while ConocoPhillips saw a 65 percent increase to $5.18 billion. Exxon Mobil Corp., the world's largest publicly traded oil company, is due to report later Thursday.

Shell said that excluding the damage caused by militant attacks on its operations in Nigeria and the fallout from hurricanes Katrina and Rita in the Gulf of Mexico, production would have been flat.

Shell is missing around 180,000 barrels per day in Nigeria because of recent attacks, and said Thursday it couldn't confidently predict when production will resume.

Van der Veer said that despite a pipeline rupture this week, possibly due to an attack by militants, the company has no intention of scaling back operations in the West African nation. "We are not afraid to invest in Nigeria," he said.

The Niger Delta region has been the scene of frequent disputes for years between oil companies and communities that demand a greater share of the wealth of Africa's largest crude producer. At least 31 expatriate workers have been held hostage by a variety of militant groups so far this year.

Shell's results Thursday beat earnings estimates compiled by Dow Jones, which had predicted a 17 percent rise in earnings, helped by strong refining margins. Shares rose 1.9 percent to euro27.89 ($35.22) in Amsterdam trading.

At Shell's second-biggest division, which refines oil and sells it to consumers at the pump, profits increased 13 percent to $3.02 billion.

"Higher earnings due to stronger refining margins particularly in the United States, and increased trading profits from a positive trading environment were partially offset by the impact of lower retail marketing margins and reduced refinery utilization mainly in Europe," Shell said.

Shell's 2004-2005 accounting scandal, in which it was forced to repeatedly reduce the size of its proven oil reserves, continued to affect the company's earnings and prospects.

The company said Thursday it had reserved $500 million in the second quarter to pay shareholder class action lawsuits.

Shell has also been spending heavily to restore reserves, planning investments of $19 billion in 2006, and $21 billion in 2007, most of it in exploration and production.

But in 2005, the company pumped more oil than it added to proven reserves, and in Shell's 2005 annual report the proven reserves stood at around 11.5 billion barrels.

Vanguard

Copyright: 2006 Vanguard

 

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