Shell beats output dip at £3.5bn

By ROBERT LEA
Updated:

 

Royal Dutch Shell today shrugged off falling production levels and lower oil prices in the early part of the year to report record first-quarter earnings of $6.932bn (£3.48bn) - profits of nearly £40m a day.

The Anglo-Dutch oil major put its great rival BP into the shade with 14% growth in profits in the first three months of 2007, beating City estimates which had predicted modest falls in earnings.

Shell's performance compares with a first-quarter slump of 17% at BP, whose tsunami of bad news in recent months was topped off by the ignominious departure of its chief executive Lord Browne this week amid a perjury and gay lover scandal.

However, all is not rosy in Shell's main business, its exploration and production arm, which warned in a shock alert in February that it was ripping up its output forecasts for the rest of the decade.

The exploration and production business reported a 6% slide in earnings in the quarter to $3.5m on an oil price that was 6.5% lower a year ago and on production that fell 6% to just over 3.5m barrels a day.

At the full-year results three months ago, chief executive Jeroen van der Veer stunned investors by slashing production guidance for this year to between 3.3m and 3.5m barrels a day from previous indications of up to 3.8m barrels.

Goals of up to fourm barrels a day in 2009 and up to five million barrels by 2014 were also shredded. Today van der Veer said Shell had pulled off a 'competitive result'.

While the chief executive had highlighted Nigeria as one reason for the output falls - 190,000 barrels a day of Shell production remains shut down because of the security issues and oil worker killings in the Western Delta area of Nigeria, one of the great exploration boom regions of the world - finance director Peter Voser said the yearon-year fall was almost wholly weather-related.

'We have had very mild winters, and therefore lower demand, both in north-west Europe and the US,' said Voser.

Declining to give a date on when Shell may be able to start producing again in the Western Delta, he added: 'We are back in certain areas and currently assessing the damage.'

Shell's financial performance was enhanced by a strong showing in the chemicals division, where profits leapt 250% on the back of new facilities in China, where production has been ramped up to meet demand.

The figures put Shell shares among the FTSE 100 leaders today, up 33p at 1840p.

Voser refused to comment on industry speculation that Shell and BP or other of the supermajors may seek to break up parts of their businesses and merge them with rivals.

Of the departure of Lord Browne, he said: 'It is a BP issue and a personal issue for Lord Browne. I assume in the long term BP will remember the achievements of Lord Browne.'

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