Oil production boom helps Shell beat earnings forecast

AMSTERDAM - The Associated Press

A sign shows gas prices at a Shell service station in Los Angeles, California. AFP photo

Royal Dutch Shell delivered forecast-busting first quarter earnings yesterday as it benefited from an increase in production and the higher price of oil.

The oil company’s earnings on the industry standard CCS or “current cost of supplies” measure, which strips out changes in the price of oil, and excluding one-time charges, were $7.30 billion, up 16 percent from $6.29 billion.

Earnings were higher than anticipated,” the consensus in the markets was that the company would post something around the $6.5 billion mark.

Chief Executive Peter Voser credited the performance on “a combination of improved operating performance, increased upstream volumes and strong oil prices.” Analysts from Investec said the company recorded a record result in its upstream business, or production arm, and that helped the company offset weakness in the refining division.

Shares in the company were 2.7 percent higher in early trading in London at 22.47 pounds.

1.4 pct rise in production

A more detailed look at the statement shows that first quarter earnings, including one-off items, fell by less than a percent to $8.72 billion. In the fourth quarter of 2011, Shell made $8.78 billion, including proceeds from selling some natural gas fields in Texas.

In Shell’s “upstream,” arm, production rose 1.4 percent to 3.55 million barrels a day as new projects came on line or increased volumes. Shell said that without the impact of asset sales, the rise would have been 4 percent.

Selling prices on average were $111.5 per barrel in the quarter, against $97.2 per barrel a year ago.
The company has been investing heavily in new production and is targeting 4 million barrels per day of production by 2018. It noted that it has cut natural gas production in North America by 32 percent, responding to low prices, and increased it in other areas by 20 percent, without giving absolute figures.

Shell’s “downstream” operations, which include refining operations and chemicals sales, earnings rose 13 percent to $1.32 billion, entirely due to one-time charges last year and one-time gains this year. Stripping out those effects, profits would have declined 32 percent.
Shell blamed a “weaker global refining environment.”