Shell Q2 net profit up 15 percent

[July 29, 2010]  THE HAGUE, Netherlands (AP) -- Royal Dutch Shell, Europe's largest oil company, reported a 15 percent rise in net profit for the second quarter thanks to higher oil and gas prices and the early completion of a cost-cutting program.

Net profit during the period was $4.39 billion, up from $3.82 billion last year. Revenue swelled to $90.57 billion from $63.88 billion, as prices rose and the company produced more oil.

Chief executive Peter Voser said Thursday the results represented "a good performance" in a tough economy.

Shell's rival BP PLC on Tuesday reported a record quarterly loss of $17 billion in the second quarter after setting aside $32.2 billion to cover the costs of the Gulf of Mexico oil spill.

Voser called the spill "a tragedy for everyone affected" but added that "worldwide deep water production has an important role to play in the global energy supply equation."

He told reporters he did not expect tighter rules on the industry in the aftermath of the spill to have a major impact on Shell.

"From our side we are complying with most of them already," he said.

Chief financial officer Simon Henry said Shell took a $56 million charge in the second quarter for idling rigs in the Gulf of Mexico due to the drilling moratorium imposed after the Deepwater Horizon offshore drilling rig exploded on April 20, killing 11 people and unleashing an unprecedented environmental disaster along the U.S. Gulf Coast.

Henry said the six-month moratorium was too short for Shell to consider redeploying those rigs else where.

"We are just trying to keep the rigs warm, ready to start up again," he said.

Shell said it expects to sell off assets worth $7-8 billion in 2010-11, around double the usual pace of sales. That announcement echoed BP's decision to sell $30 billion in assets.

Shell said current cost of supply net profit nearly doubled to $4.5 billion for the quarter from $2.3 billion a year earlier. The accounting method strips out changes in the value of fuel inventories to give a reliable measure of underlying profitability.

Richard Hunter, Head of UK Equities at Hargreaves Lansdown Stockbrokers, said "Shell's update serves to underline the stark difference in fortunes of the U.K.'s two oil majors."

He said that while the Gulf of Mexico spill had hit BP hard, "Shell has continued to drive its own prospects forward."

"Inevitably, there are headwinds, such as the clampdown on deep sea drilling in the U.S. and the ongoing uncertainty with regards to the global economic recovery," he said.

Shell said its production rose five percent from the same quarter last year to 3.11 million barrels of oil per day.

Oil product sales volumes rose seven percent and chemical product sales volumes grew 18 percent.

Sales of liquefied natural gas soared by 34 percent from a year earlier to 3.88 million tons in the second quarter.

Shell said the price it receives for its oil rose 41 percent in the second quarter while gas prices were up 15 percent.

The company announced a dividend of 42 cents per share, unchanged from a year earlier.

Shell also said it had completed a major corporate restructuring six months ahead of schedule, resulting in savings of more than $3.5 billion a year. The company said the cost-cutting measures would reduce its staff by 7,000, 18 months earlier than planned.

"We continue to see mixed signals in the global economy," Voser said. "Oil prices have remained firm so far this year, but refining margins, oil products demand and natural gas spot prices all remain under pressure. Our earnings and cash flow have rallied from 2009's lows, but the outlook remains uncertain."

[Associated Press; By MIKE CORDER]

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