Shell profits rise 60% to $4.8bn

Shell profits rise 60% to $4.8bn
By Ed Crooks, energy editor
Copyright The Financial Times Limited 2010
Published: April 28 2010 08:41 | Last updated: April 28 2010 08:41
http://www.ft.com/cms/s/0/111326d0-5298-11df-a192-00144feab49a.html


Royal Dutch Shell, the oil and gas group, has welcomed signs of an improving economic outlook as it reported a 60 per cent rise in underlying post-tax profits, exceeding analysts’ expectations.

Earnings on a current cost of supply basis, which strips out the effect of commodity price movements on inventories, were $4.9bn for the first quarter, up 49 per cent from $3.3bn in the equivalent period of 2009.

Stripping out one-off items gives a rise of 60 per cent to $4.8bn, which, as with BP’s first quarter results on Tuesday, was well ahead of the average of analysts’ expectations, which had been for a rise of about 30 per cent.

Peter Voser, the company’s chief executive, said he was very pleased with the results, “which were largely driven by our own actions”.

Shell cut 5,000 jobs last year, and expects to cut a further 2,000 in 2010-11.

However, the results have also benefited from a sharp rise in oil prices compared with the first quarter of 2009, and a more modest recovery in natural gas prices and refining margins compared to the fourth quarter of that year.

Mr Voser warned: “Although there are signs of an improving economic outlook, we are not relying on it, we are continuing with our focus on cash flow growth, underpinned by new project start-ups and lower costs.”

Earnings per share were up 48 per cent at 80 cents, and the dividend was left unchanged at 42 cents.

In spite of the improvement in Shell’s fortunes, its gearing is continuing to rise as it continues its heavy investment programme, one of the largest of any company in the world.

Net debt as a proportion of capital employed rose from 15.5 per cent at the end of 2009 to 17.1 per cent at the end of March 2010.

The recovery in group earnings was driven by the oil and gas exploration and production business, which reported profits of $4.415bn, twice as much as in the first quarter of 2009.

The chemicals business has also been recovering strongly, making $313m in the first quarter; nearly as much as its profit for the whole of 2009. Refining and selling oil products made $430m; less than half the $1.077bn reported for the equivalent period of 2009, but still an improvement on the lossmaking second half of that year.