Shell announces huge rise in profits

By Russell Lynch, PA
Thursday, 30 October 2008

Oil giant Royal Dutch Shell today joined the profits bonanza from record prices with a 71 per cent jump in third-quarter earnings.

The firm made a mammoth 10.9 billion US dollars (£6.6 billion) between July and September - a period when oil prices hit a peak above 147 dollars a barrel.

The news, which is likely to spark fresh calls for a windfall tax, comes two days after rival BP posted its biggest-ever quarterly profits of £6.4 billion.

Royal Dutch Shell posted the huge profits - a quarterly record and equivalent to nearly £72 million a day - despite a 1 per cent fall in production compared to last year.

This was due to factors such as the impact of hurricane damage in the Gulf of Mexico, which hit refining availability, as well as maintenance work in the North Sea.

Oil prices have since fallen back to less than half their mid-July peak to trade at around 70 dollars a barrel, as global demand fears mount.

Chief executive Jeroen van der Veer - who called the results "satisfactory" - said the company was "robust across a wide range of oil prices".

"We are watching the world economic situation closely," he added.

Even stripping out more than 2.8 billion US dollars (£1.7 billion) of exceptional gains from disposals and revalued oil and gas contracts, Shell's "clean" profits of 8 billion US dollars (£4.8 billion) were well ahead of City forecasts of 7.2 billion US dollars (£4.3 billion).

Appearing on GMTV this morning, Chancellor Alistair Darling said he wanted to see reductions in oil prices passed on to the consumer.

He said: "I want the oil companies to pass on these reductions to the pumps as soon as possible, because people are entitled to see the benefits."

Between them Shell and BP have now posted profits of £13 billion this week.

Shell's profits from exploration and production jumped 65 per cent to 5.5 billion US dollars (£3.3 billion) despite higher exploration costs and production disruption.

The stormy hurricane season and shutdown of its St Fergus gas processing base in the North Sea cost it an estimated 120,000 barrels of oil equivalent a day in production, the company added.

"Earnings compared to the third quarter 2007 reflected the benefit of higher oil and gas prices on revenues," the firm said.

The firm's average selling price for its oil was 113.90 US dollars a barrel between July and September - compared to 69.31 US dollars during the same period last year.

Investors meanwhile cashed in with an 11 per cent rise in the third-quarter dividend over last year.

Mr van der Veer added: "Our strategy remains to pay competitive and progressive dividends, and to make significant investments in the company for future profitability."

Yesterday Shell named chief financial officer Peter Voser as its next chief executive. He will take over when Mr van der Veer retires at the end of June.