Shell posts double second-quarter profits Friday July, 30, 2010
The increase in profit, which exceeded earlier targets, came after the group cut $3,5bn in costs and 7 000 jobs, allowing it to wrap up its overhaul six months quicker than planned. Shell also said it would boost asset sales, a move very much similar to the strategy BP announced earlier in the week to among other things pay costs related to its oil spill in the Gulf of Mexico, upgrade its portfolio of fields, and offer better growth. “Shell’s delivery window is ongoing and 2011 should be a transformational year for operational upside and cash flow,” said Jason Kenney, oil analyst at ING in Edinburgh. Shell’s year-on-year profit growth was flattered by some big non-cash charges in the second quarter of 2009. Excluding such non-operating items, the result grew 34% to $4,21bn, beating an average forecast of $3,99bn from a poll of 10 analysts. Weeks earlier, Shell announced intentions to sell downstream businesses in 21 African countries earlier this year. At the time, it said the preferred outcome was the sale of the assets as going concerns. Independent energy trader Vitol and private investment firm Helios Investment Partners were named by Shell as the potential joint acquisition of the group’s downstream businesses in 19 countries in Africa. The confirmation of the negotiations by the Netherlands based company shed light on the identity of the companies interested in Shell’s assets, and put to rest reports that Oil Libya had put a 2bn offer for the Shell assets. Output rose 5% in the second quarter compared to the same period in 2009, to average 3,11 million barrels of oil equivalent per day (boepd) in the quarter — the second consecutive quarter of strong growth, indicating that Shell is getting to grips with a 7 year decline in oil and gas production. The portfolio is however becoming increasingly focused on gas, which traditionally has offered weaker returns than crude. Oil represented around 53% of total production in the quarter, against 59% in the same period last year. The shift was driven partly by a 34% jump in volumes of liquefied natural gas. Profits were boosted by a benign operating environment. The price Shell received for its oil rose 41% in the quarter, compared with the second quarter of 2009, while gas prices were 15%. Refining margins and retail fuel sales also rose. Shell gave a cautious outlook on the global economic environment and for fuel demand. “We continue to see mixed signals in the global economy. Oil prices have remained firm so far this year, but refining margins, oil products demand and natural gas spot prices all remain under pressure ... the outlook remains uncertain,” Chief Executive Peter Voser said in a statement. Shell’s London-listed “B” shares traded up 0,2% at 0751 GMT against a 0,3% drop in the STOXX Europe 600 Oil and Gas index. Edited by Fredrick .C. Nwonwu |
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