Royal Dutch Shell, Europe's biggest oil company, said second-quarter profit climbed 33 per cent, boosted by record crude prices and higher natural gas, Bloomberg reported.
Net income rose to $11.56 billion, or $1.87 a share, from $8.67 billion, or $1.38, a year earlier, The Hague-based company said yesterday. Excluding gains or losses from holding inventories and one-time items, profit was $7.83 billion, which didn't include additional fair value adjustments of $750 million. The median estimate of 11 analysts surveyed by Bloomberg was for profit of $8.3 billion.
Shell CEO Jeroen van der Veer raised investment spending targets for this year as the company plans to counter lost output in Nigeria and Russia by mining Canadian oil sands and developing a Qatari gas-to-liquids venture. US oil futures climbed above $140 a barrel for the first time in June and natural-gas prices were 50 per cent higher on the year.
"These are a good set of numbers," Jason Kenney, an Edinburgh-based analyst at ING Wholesale Banking, said in a telephone interview yesterday. "Earnings at exploration and production were excellent," said Kenney, who has a 'buy' rating on the stock.
Shell's London-listed Class A shares added 11 pence, or 0.6 per cent, to 1,848 pence as of 9.17 am in London. The stock is down 12 per cent this year, compared with a 15 per cent decline for BP, Europe's second-biggest oil producer, which last month posted a 28 per cent increase in profit to $9.47 billion.
ExxonMobil, the world's biggest energy company, is expected to report a 26 per cent increase in net income to $12.9 billion, later in the day, the highest ever for a US company without one-time gains, according to the average of seven analyst estimates compiled by Bloomberg.
Of the 34 analysts tracked by Bloomberg who cover Shell, 22 recommend buying the shares, eight advise holding the stock and four say 'sell'.
Sales rose 54 per cent to $131 billion, Shell said. The company plans to spend between $35 billion and $36 billion this year on acquisitions and drilling programme, "one of the largest investments in the industry" worldwide, according to spokesman Rainer Winzenried. It previously targeted investment of about $27 billion in projects. Overall crude and natural-gas output fell 1.6 per cent from a year ago. Including bitumen from oil sands, production averaged 3.126 million barrels of oil equivalent a day.
Shell's output has fallen for the past five years as the company ceded a stake in Russia's Sakhalin-2 venture and militant attacks in Nigeria kept fields offline.
Shell's earnings "were good but not exceptional like BP's," said David Buik, a market analyst at BGC Partners in London. " Nigeria production is a worry and margins have fallen" in the Gulf of Mexico, he said.
The company lost about 160,000 barrels a day in production in Nigeria in the second quarter as militants attacked facilities and blew up pipelines. Shell suspended export obligations for its Bonny Light crude this week after the latest militant raid.
Shell is turning to so-called unconventional projects to replace aging fields as high oil prices encourage energy-rich nations to hold onto a bigger slice of their resources.
Earlier this month, Shell agreed to buy Duvernay Oil for about $5.8 billion, including assumption of debt, to expand gas output from hard-to-tap formations in western Canada.
Van der Veer said in June he expects to sign oil agreements with Iraq shortly. Iraq has been negotiating technical service contracts with Shell and other oil companies as it seeks to almost double crude output to 4 million barrels a day in the coming years.
Profit at Shell's refining business slid 63 per cent in the quarter on higher costs as oil prices outpaced gains in gasoline. Refining margins fell by half to $8.19 a barrel in the second quarter from $16.61 a year earlier, according to BP data.
"It is disappointing mostly because the products division is not performing," said Kenney.