Shell profits soar 96% on high oil price

<a href=www.thescotsman.co.uk>The Scotsman JAMES ASHTON SENIOR CITY CORRESPONDENT ROYAL Dutch/Shell yesterday became the latest oil major to report record profits on the back of soaring oil prices in the run-up to the war in Iraq.

The British-Dutch company reported underlying profits up 96 per cent to US$3.91billion (£2.44 billion) - or £312 every second - in the first quarter of 2003.

The result was above analysts’ expectations and follows a glut of huge profits from its peers.

Earlier this week, BP reported net profits up 136 per cent to $3.73bn (£2.35bn) as oil prices touched 12-year highs. And US firm ChevronTexaco said yesterday that it more than doubled its profits in the same period to $1.92bn (£1.2bn), while its larger peer ExxonMobil tripled its contribution.

Oil prices jumped 48 per cent compared with a year earlier to $31.50 per barrel, boosted by war in Iraq, strikes in Venezuela and civil unrest in Nigeria.

Natural gas prices were also up significantly during the period and refining margins were boosted by a tightening of the global balance between supply and demand.

The shares were up 12.25p, or 3.3 per cent, in London.

Investors have come to expect a forecast-beating figure from the company, but are more concerned about the current outlook. Crude fell this week below $25 per barrel from an average of more than $30 in the quarter, as markets anticipate increased supplies after the war and sluggish demand growth.

Peter Hitchens, an analyst at French stockbroker Cheuvreux, said: "If they hadn’t been at the top of the range that would have been a disappointment.

"The problem is, that’s history, and now the oil price is the issue."

Despite a run of huge profits, Royal Dutch shares have dropped 35 per cent and Shell 21 per cent in the past year - among the largest falls of the world’s top oil stocks - as investors anticipate lower crude prices this year.

Shell bought out Enterprise Oil, the North Sea exploration and production business last year, helping production rise 6 per cent in the quarter to 4.2 million barrels.

But the acquisition has not been enough to dispel ongoing concerns specific to the world’s second-largest oil firm about near-zero underlying output growth, and oil and gas reserves that are running out faster than new finds can be booked.

Underlying growth was flat, in line with recent forecasts from the company for 2003.

Shell officials said that its plan for 4.1 million barrels a day of output this year was on track and reaffirmed a 3 per cent long-term output growth target.

Some of Shell’s production was shut in Nigeria and about 150,000 barrels per day of its West Nigeria Delta joint venture remains closed.

Excluded from the adjusted figure was the impact of a $1.7bn (£1.05bn) gain from the sale of 14.75 per cent stake in German gas distributor Ruhrgas to German utility E.ON.