Royal Dutch Shell joins bonanza with 71% jump

Oct 31 2008 by Iain Laing, The Journal

OIL giant Royal Dutch Shell has joined the profits bonanza from record high oil prices with a 71% jump in third-quarter earnings.

The firm made a mammoth £6.6bn between July and September – a period when oil prices hit a peak above US$147 a barrel but have since fallen dramatically.

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 £6.4bn.

Royal Dutch Shell posted the huge profits – a quarterly record and equivalent to nearly £72m a day – despite a 1% 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 US$70 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”.

Even stripping out more than £1.7bn of exceptional gains from disposals and revalued oil and gas contracts, Shell’s “clean” profits of £4.8bn were well ahead of City forecasts of £4.3bn.

Chancellor Alistair Darling yesterday 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.”

Shell’s profits from exploration and production jumped 65% to £3.3bn despite higher exploration costs and disruption to production by hurricanes. The firm’s average selling price for its oil was US$113.90 a barrel between July and September – compared to US$69.31 during the same period last year.

Charles Stanley analyst Tony Shepard said: “Overall, this is a good outcome but some investors will be disappointed by the sluggish production volumes.”

Meanwhile, Exxon Mobil made a profit of £8.97bn between July and September, smashing its own record for the highest quarterly profit by a US company.

The new record represents a 58% rise on profits compared with the same period last year.

Chief executive Rex W Tillerson said the profits could have been even higher, had it not been for falling oil prices and extreme weather.