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Shell reports profits leap, prepares payout over reserves crisis
By Ben Perry
AFP
LONDON
Petroleumworld.com 07 28 06
Anglo-Dutch energy group Royal Dutch Shell reported an adjusted net profit jump of 36.0 percent in the second quarter boosted by record high oil prices, and said it was ready to pay US damages over its oil reserves crisis two years ago.
The group said it was prepared to pay 500 million dollars (397 million euros) to settle a class-action lawsuit from US shareholders arising from the group's oil and gas reserves downgrade in 2004.
Net profit in the second quarter, excluding changes to the value of its energy inventories, totalled 6.314 billion dollars (4.955 billion euros).
After stripping out inventory valuation changes and a one-time charge of 232 million dollars, Shell said that net profit rose to 6.546 billion dollars in the three months ended June 30, compared with the same period a year earlier.
That beat analysts' consensus forecast of 6.125 billion dollars.
The one-off charge was owing mainly to tax changes in Canada and a revamp of Shell's retirement plan in France.
"These results are underpinned by overall good operational performance and not simply high energy prices," chief executive Jeroen van der Veer said in a statement accompanying the earnings release.
"We plan to open up some 20 billion barrels of oil equivalent resources by the end of this decade. We are making steady progress on our projects, and building our portfolio for the future," he added.
Investors cheered Shell's results, sending the price of its 'B' shares 2.84-percent higher to 1,995 pence in afternoon London trade. The capital's FTSE 100 index of leading shares, on which Shell is listed, rose 0.57 percent to 5,910.50 points.
"Overall, the profit figures are impressive," said Keith Bowman, analyst at Hargreaves Lansdown Stockbrokers.
"But going forward, high oil prices will not continue to mask the quality or not of underlying management."
Crude futures earlier this month struck all-times highs above 78 dollars per barrel in London and New York trading, owing to strong demand for energy amid tight supplies.
On Tuesday, Shell's bigger rival BP reported a 22.8-percent surge in second-quarter adjusted net profit to 6.118 billion dollars, but unlike Shell, its numbers fell short of market expectations.
On Thursday Shell said that its crude production fell by 8.0 percent to 3.253 million barrels per day during the second quarter, reflecting the disruptions caused by civil unrest in Nigeria and last year's hurricanes in the United States that disrupted oil installations in the Gulf of Mexico.
For the full year, Shell expects output to reach 3.4 million barrels of oil equivalent per day, reflecting lower output in Nigeria for the rest of 2006.
"At present Shell is in the early stages of the return to operations process (in Nigeria)," it said.
Royal Dutch Shell had said on Tuesday that a leak to an oil pipeline in southern Nigeria caused last week had cut its output there by 180,000 barrels per day.
Shell meanwhile reaffirmed its production targets for 2007 and 2009.
Elsewhere, the Anglo-Dutch company said that its revenue rose 1.0 percent to 83.127 billion dollars during the second quarter compared with a year earlier.
Shell added that it was "determined and prepared" to resolve the US litigation "for, among other terms, a payment by Shell of 500 million dollars" over its reserves miscalculation.
The reserves debacle in 2004 triggered an internal crisis at Shell, leading to the energy giant switching to a more traditional single-board structure with one chairman and one chief executive as it sought to restore investor confidence.
Previously it had dual-board arrangements in Britain and the Netherlands.
AFP 27 1144 GMT 07 06
Copyright ©2006 AFP. All Rights Reserved.
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