Shell cashes in on high oil prices

Royal Dutch Shell Plc, Europe's biggest oil company, said fourth-quarter profit climbed 60 percent, boosted by crude prices that approached $100 a barrel and countered lower production and earnings from refining.

Net income rose to $8.47 billion from $5.28 billion a year earlier, the Hague-based company said yesterday. Excluding inventory changes and one-time items, earnings missed analyst forecasts.

"The main reason earnings are not higher is because of the weakness in refining margins," Bertrand Hodee, a Paris-based analyst at Kepler Equities, said in an interview before the earnings were released. Operational issues in Canada and Singapore cut output, said Hodee, who has a "buy" rating on the stock.

Oil prices in New York were 50 percent higher in the fourth quarter compared with a year earlier, reaching a record $100.09 on Jan 3. Chief Executive Officer Jeroen Van der Veer topped analysts' estimates for the seventh period in the third quarter because of rising crude prices and gains on investments.

Excluding gains or losses from holding inventories and one- time items, profit was $5.72 billion, missing the $6.03 billion median forecast from eight analysts surveyed by Bloomberg.

Shell's London-listed Class A shares are down 15 percent this year, matching the decline by BP Plc, Europe's second- biggest oil company, which reports earnings on Feb 5. Shell closed at 1,789 pence on Wednesday.

ConocoPhillips, the third-largest US oil company, said on Jan 23 that fourth-quarter net income jumped 37 percent to $4.37 billion on high oil prices. Exxon Mobil Corp, the world's biggest oil company, and Chevron Corp, No 2 in the US, report earnings today.

Refining margins, or profits from turning crude into fuels such as gasoline and diesel, fell to $5.68 a barrel in the fourth quarter from $6.40 in the year-earlier period, according to data posted on BP's website.

A fire at Shell's 155,000 barrel-a-day Athabasca oil-sands mine in Alberta and repairs at the 458,000 barrel-a-day Pulau Bukom refinery in Singapore crimped output during the quarter.

In a letter to employees dated Jan 22, Van der Veer said that global demand for energy will outstrip supply within seven years because of "population growth and economic development. After 2015 supplies of easy-to-access oil and gas will no longer keep up with demand".

Shell's output has fallen for the past four years and production volumes remained "weak" in 2007, James Neale, a London-based analyst at Citigroup Inc, said in a note to investors on Jan 22.

There have been no "obvious project start-ups" in the fourth quarter and "further discussion" on the economic viability of Nigerian production is expected, Neale said.

Shell has been losing Nigeria production since late 2005 after militants attacked oil installations in the Niger Delta.

Agencies

(China Daily 02/01/2008 page17)