Huffpost Business

Shell Profits Rise 22 Percent

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AMSTERDAM, Netherlands — Royal Dutch Shell PLC, Europe's largest oil company, Thursday reported a 22 percent jump in net profit for the third quarter, despite a fall in production, thanks to high oil prices and gains from the sale of operations.

The company earned $8.45 billion, up from $6.92 billion a year ago, as sales rose 45 percent to $132 billion. The earnings included one-off gains of $2.06 billion, mostly from the sale of operations, up from $265 million in such gains a year earlier.

Shell's largest European rival BP PLC reported net profit rose 83 percent to $8.05 billion Tuesday. The world's largest oil company, Exxon Mobil Corp., is due to report later Thursday.

Shell's oil production fell to 2.93 billion barrels of oil and equivalents per day from 3.14 billion a year earlier. The company's average selling price was $111.18 per barrel, up from $70.81 a year ago. Oil hit a record $147 in July but has fallen by more than half.

Given the steep fall of oil prices in recent weeks, Chief Executive Jeroen van der Veer said the company was watching the global economic situation closely, but added Shell would be profitable amid a wide range of energy prices.

"It was very difficult to forecast $147 in July, and then in October that they would fall below $60 _ there are so many factors at work and even then you miss what will OPEC do," Van der Veer said on a conference call.

He declined to say whether the company would cut capital expenditure on projects next year, but said Shell would push back a decision on expanding an oil sand project in Canada.

"Our strategy remains to pay competitive and progressive dividends, and to make significant investments in the company for future profitability," he said.

On Wednesday, Shell said that Chief Financial Officer Peter Voser will be promoted to Van der Veer's job after he retires in July 2009. Shell maintains dual headquarters in London and The Hague. Voser, a Swiss national, will be the company's first CEO from outside Britain or the Netherlands.

"We want to be a meritocracy, so that means any nationality can make it to the top," Van der Veer said. "I think the appointment of Peter Voser has demonstrated that."

Analyst Alexandre Weinberg of Petercam Securities said the results were "clearly better than what was expected ... and this is throughout all divisions."

"Going forward, we clear expect the weaker pricing environment to take its toll on profit," he said. But he said the impact of a weakening economy would be less on oil majors since production costs will fall and smaller competitors may face financing problems.

He also said the company's strong cash position ensures it will be able to pay dividends, and invest in new capacity. He repeated a "buy" rating on shares.

The company's stock was down 2 percent at 21.00 euros ($22.78) in Amsterdam.

Shell's exploration and production division increased profit 65 percent to $5.50 billion, entirely due to oil price increases. Shell said a 10 percent fall in oil production was attributable in part to hurricanes in the Gulf of Mexico. Gas production was down 2 percent.

The company's refining arm showed a loss of $44 million, down from $2.15 billion profit a year ago. On a "current cost of supplies" basis _ a closely watched industry standard that strips out differences in the rise and fall of oil prices between drilling and refining _ earnings were $2.30 billion, up from $1.65 billion.