Taipei Times-THE GUARDIAN Sunday, May 04, 2003,Page 10

Shell capped a record first quarter for the oil majors by announcing a doubling of earnings Friday as war in Iraq, turmoil in Nigeria and strikes in Venezuela provoked a surge in prices.

The three biggest oil groups -- ExxonMobil, Shell and BP -- earned almost US$16 billion in the first three months of this year when political unrest, military action and a cold winter in North America pushed prices to the ceiling.

Shell's net income was up 136% at US$5.3 billion, boosted by the US$1.3 billion sale of its stake in German gas company Ruhrgas, while its adjusted earnings -- its preferred measure -- rose 96% to US$3.9 billion.

Phil Watts, chairman, sounded a cautionary note by conceding that this happened in an "exceptional" quarter. He warned that the high margins were likely to be unsustainable in the months ahead.

Shell's record earnings came a day after Exxon, the world's largest oil group, reported the biggest quarterly corporate profits in history at US$7 billion and three days after BP announced its own record of US$3.7 billion.

Shell took some gloss from its figures by saying return on capital employed, the industry's benchmark, was 18.3%, against 20% at BP and 30% at Exxon.

The Anglo-Dutch group's earnings were propelled by a rise in profits at its exploration and production unit from US$1.45 billion a year ago to US$2.8 billion, on the back of higher prices.

Output of oil and gas rose to its highest levels in 10 years, up 6% to 4.2 million barrels a day, partly due to the contribution of Enterprise Oil, bought a year ago. Shell expects average output this year to be 4.1 million barrels a day.

The group said prices for the second quarter would depend on the level of OPEC oil available, the impact of the cartel's recent decision to cut output, lower seasonal demand and, not least, the return of Iraqi exports to the market.

OPEC is reducing production by 2 million barrels a day from June 1 and is holding out the prospect of further cuts to prevent over-supply and a collapse in prices.

Shell said oil refining margins were considerably higher than a year ago, with demand bolstered by the cold winter, high US natural gas prices and the extended shutdown of Japan's nuclear power plants.

"Margin outlook for the remainder of 2003 is uncertain and much will depend on the pace of global economic recovery and Opec output policy in response to the expected return of Iraqi crude exports to the market," it said.

Watts added: "In uncertain economic times, the diversity of our businesses and our geographic spread are strengths." This story has been viewed 223 times.

Posted on Sat, May. 03, 2003 By Rick Jurgens CONTRA COSTA TIMES

ChevronTexaco Corp.'s first-quarter net income jumped 165 percent, to $1.92 billion from $725 million a year ago, as high oil prices more than offset a decline in crude oil production and as U.S. refineries returned to profitability with a boost from California motorists.

"In summary, the company had a very strong quarter," Chief Financial Officer John Watson said in a conference call with Wall Street financial analysts.

Shares of ChevronTexaco rose $2.35, or 3.7 percent, Friday to close at $65.35 after the company's early-morning announcement that per-share net income was $1.81 for the three-month period ended March 31, compared with 68 cents a year ago.

Excluding a charge to reflect the cost of an accounting change, ChevronTexaco posted net income of $2.12 billion, or $1.99 a share. That beat the $1.81 a share consensus estimate of 19 analysts surveyed by First Call/Thomson Financial and the 88 cents a share of a year ago.

The latest numbers tasted like a refreshing drink after a long drought for holders of ChevronTexaco shares, which closed at $90.89 on the day of the October 2001 merger that created the company, said Fadel Gheit, an analyst for Fahnestock & Co. Gheit owns ChevronTexaco stock but Fahnestock does not do investment banking business for the oil giant.

Still, questions remain about ChevronTexaco's future prospects, especially its ability to expand oil reserves and boost production, said Tina Vital, a stock analyst for Standard & Poor's, a market information service. Vital does not own the stock.

In January ChevronTexaco shelved its target of an annual growth rate of 2.5 percent to 3 percent for reserves and production, a goal Chief Executive Dave O'Reilly announced in November 2001. The company has begun selling less profitable oil and gas reserves and, according to Vital, begun a review of its reserve and production growth goals. Fred Gorell, a ChevronTexaco spokesman, said the company as a matter of policy would not comment on whether or not an internal review is under way but that there is currently no specific target for growth.

Failure to deliver on earlier growth promises, along with losses from an investment in Dynegy, a troubled energy marketer, put ChevronTexaco's stock "in the penalty box for the last year and a half," Gheit said. But in the first quarter, he added, "higher prices made investors forgive all (the company's) sins."

Those higher prices worked their way through to ChevronTexaco's bottom line. Profits from U.S. crude oil production more than tripled to $1.02 billion, excluding an accounting charge, from $304 million a year ago. Hefty price hikes powered the advance, as the average selling price for a barrel of domestic petroleum liquid was $29.14, compared with $16.90 a year ago. Daily production dropped to 577,000 barrels from 619,000 barrels a year ago, as yields dropped from older wells and storm damage to some Gulf of Mexico wells proved too expensive to repair.

Higher prices produced a smaller profit gain from international exploration and production, to $1.10 billion from $837 million. The average take from a barrel of liquid lifted outside the United States rose to $29.63 a barrel from $19.02. Production slipped to 1.7 million barrels a day from 1.8 million a year ago. Civil unrest in Nigeria and Venezuela and a work project in Angola slowed output, and quirks in a production sharing arrangement in Indonesia lowered output.

California gasoline prices that stayed above $2 a gallon for much of the quarter boosted margins -- the spread between wholesale prices and crude oil costs -- at ChevronTexaco's West Coast refineries, which include large California producers in Richmond and El Segundo. That spread averaged $20.30 a barrel, or 48 cents a gallon, compared with $12.27 a barrel, or 29 cents a gallon, a year ago. West Coast margins were more than double those for ChevronTexaco's other U.S. refineries. Nationwide, daily refinery output declined to 814,000 barrels from 868,000 barrels a year ago. But that was enough to restore profitability, to the tune of $70 million, in a segment that lost $154 million a year ago.

International refining and marketing profits rose to $245 million from $93 million year ago.

Strong sales of jet fuel to the military contributed to higher refined product sales.

Watson said ChevronTexaco has met its merger target of $2.2 billion a year in operating cost reductions but is looking to squeeze out further savings. "The pressure is on to deliver lower operating expenses across all of our businesses," he said.

But Vital, who has a hold rating on the stock, said that until ChevronTexaco shows how it plans to grow output "people are a little cautious" about the company.

Posted on Sat, May. 03, 2003 By Alex Lawler Bloomberg News

LONDON - Royal/Dutch Shell Group and ChevronTexaco said first-quarter profits more than doubled, capping a week of record oil earnings, because prices surged amid war in Iraq and supply disruptions in Nigeria and Venezuela.

Shell, Europe's largest oil company by market value, said net income jumped to $5.33 billion from $2.26 billion in last year's first quarter. At ChevronTexaco, the No. 2 U.S. oil company, profit rose to $1.92 billion from $725 million. Sales climbed 53 percent at Shell and 46 percent at ChevronTexaco.

The combined first-quarter profits at the two companies and rivals ExxonMobil and BP tripled to $17.8 billion as crude-oil prices climbed to a 12-year high and refining margins widened. Prices have since fallen by a third, signaling lower earnings over the rest of this year.

``The question after a quarter like this one is, what do you do for us next?'' said James Halloran, who helps manage $24 billion, including nearly 1.3 million ChevronTexaco shares, at National City Wealth Management.

After adjusting for one-time items and changes in the value of inventories, Shell's profit increased 96 percent to a record $3.91 billion, beating the average estimate of $3.67 billion in a Bloomberg survey of analysts.

ChevronTexaco's profit was the highest since the company was formed through Chevron's purchase of Texaco in 2001. The company's exploration and production earnings rose 73 percent from a year earlier to $1.97 billion. Profit from oil refining was $315 million after a $61 million loss a year earlier.

Higher natural-gas prices, spurred by colder-than-normal weather across much of the United States, contributed to the profit gains. The average first-quarter price for U.S. gas futures more than doubled from a year earlier to $5.32 per million British thermal units.

This may be a high-water mark for the oil companies,'' said Tim Ghriskey, who manages $100 million in assets, including an undisclosed number of ChevronTexaco and Exxon Mobil shares, at Ghriskey Capital Management LLC. Oil prices have already dropped, and you are likely to see second-quarter profits lower.''

Higher prices didn't prompt Shell, ChevronTexaco and other oil companies to boost investment in exploration and production, largely because the gains weren't expected to hold.

ExxonMobil, based in Irving, Texas, is the world's biggest investor-owned oil company by market value. The company yesterday reported that first-quarter profit more than tripled to $7.04 billion. London-based BP, the No. 3 oil company by market value behind Exxon Mobil and Shell, on Tuesday said its profit quadrupled to a record $3.47 billion.

Meanwhile, crude oil prices rose a third day, bolstered by slowing imports into the U.S., where inventories are 10 percent lower than average for this time of year.

NewsStand - Friday, May 02, 2003 <a href=www.menafn.com>MENAFN-The Dallas Morning News Exxon Mobil Corp. Sudeep Reddy

Exxon Mobil Corp. reported a record quarterly profit of $7.04 billion Thursday, more than triple its earnings from a year earlier, but analysts said a recent drop in crude oil prices should restrain profits for the rest of the year.

"Earnings were strong but really weaker than they appear," said Fadel Gheit, an analyst at Fahnestock & Co. who attributes some of the gains to lower-than-expected tax rates and other factors out of the company's control. "When you dig into them, they are a lot softer."

Crude oil prices rose more than 50 percent in the first quarter due to the war in Iraq and production disruptions in Venezuela and Nigeria. Natural gas prices more than doubled due to cold weather and fears of a supply shortage.

Irving, Texas-based Exxon Mobil, the largest publicly traded oil company, said first-quarter earnings were $1.05 per share, compared with 30 cents a year ago, when profit was $2.09 billion. Quarterly revenue grew from $63.8 billion from $43.4 billion.

Without an accounting change, discontinued operations, merger effects and a special item, first-quarter earnings were $4.79 billion, or 71 cents a share, a penny above Wall Street's consensus estimate, according to Thomson First Call.

Despite record earnings across the sector, oil company shares have stalled as investors bet on lower profits now that commodity prices have fallen. Exxon Mobil shares closed Thursday at $35.48, up 28 cents. The stock has lost 14 percent over the last year.

But the company's shares have done better than the overall market in the last three years. They've declined 33 percent, while the Standard & Poor's 500 stock index has fallen 40 percent.

Commodity prices are still higher than historical levels, which are under $20 per barrel for crude oil and around $2 per million British thermal units for natural gas.

Crude oil for June delivery closed Thursday at $26.03 per barrel on the New York Mercantile Exchange. Natural gas closed at $5.27 per million BTUs.

That should support returns across the sector and attract new investment, said Tina Vital, an equity analyst at Standard & Poor's.

"When the market realizes that, you won't see the disconnect between the oil and gas fundamentals and the stock market," Vital said.

(c) 2003, The Dallas Morning News. Distributed by Knight Ridder/Tribune News Service.

By <a href=www.nytimes.com>BLOOMBERG NEWS

oyal Dutch/Shell and ChevronTexaco said yesterday that their first-quarter earnings more than doubled, capping a series of strong results for the industry as the price of crude oil rose.

Earlier this week, Exxon Mobil and BP reported sharp gains for the quarter, when crude oil prices climbed to a 12-year high and refining margins widened. Prices have since fallen by a third, signaling lower earnings over the rest of the year.

"This may be a high-water mark for the oil companies," said Timothy R. Ghriskey, who manages $100 million in assets, including an undisclosed number of ChevronTexaco and Exxon Mobil shares, at Ghriskey Capital Management. "Oil prices have already dropped, and you are likely to see second-quarter profits lower."

Shell, the British-Dutch giant, said net income jumped to $5.33 billion from $2.26 billion a year ago.

At ChevronTexaco, the next biggest oil company after Exxon Mobil, profit rose to $1.92 billion from $725 million. Sales climbed 53 percent at Shell and 46 percent at ChevronTexaco.

ChevronTexaco's profit was the highest since the company was formed through Chevron's acquisition of Texaco Inc. in 2001. The company's exploration and production earnings rose 73 percent from a year earlier, to $1.97 billion. Profit from oil refining was $315 million after a $61 million loss a year earlier.

Higher natural gas prices contributed to the profit gains.

In the first quarter, crude oil futures averaged $33.80 a barrel, up 56 percent from a year earlier. Prices have since fallen to about $26, with forces led by the United States taking control of Iraq and oil shipments resuming in Venezuela after a national strike. In addition, Shell and other producers have restarted wells in Nigeria that had been idle because of fighting between government and opposition forces.