London: Royal Dutch Shell Plc continued a run of better-than-expected first-quarter profit rises by the big international oil companies on the back of higher oil prices, and boosted, in its case, by an unexpected return to production growth.
Shell said current cost of supply (CCS) net income, which strips out unrealised gains related to rises in the value of inventories, rose 49% in first quarter, compared to the same period in 2009, to $4.90 billion.
Higher oil prices were the biggest driver of the gain, but cost reductions and a 6% rise in output helped too, and suggested that a turnaround plan chief executive Peter Voser launched on taking up his role last year continues to deliver benefits.
“Aided by a rising oil price, restructuring measures have gained traction, costs are being cut, whilst production in Russia and Brazil is being ramped up,” said Keith Bowman, Equity Analyst at Hargreaves Lansdown Stockbrokers.
Shell’s London-listed “A” shares traded up 1.1% at 2,019 pence at 0729 GMT, outperforming a 0.3% rise in the STOXX Europe 600 Oil and Gas index.
BP Plc, with which Shell vies for the title of Europe’s largest oil company by market capitalization, reported a forecast-beating 135% jump in net profits, on a CCS basis, on Tuesday.
On Friday, Italian oil major Eni reported a better-than-predicted 3.6% rise in net profits excluding inventory effects and non-operating items. The rise in the euro versus the dollar weighed on Eni’s result.
Shell’s core, upstream unit was the main profit driver, helped by a 74% rise in the price it received for its oil. While US gas prices also rose, European gas prices fell sharply.
Shell said production of oil and gas rose 6% in the quarter compared with the same period in 2009, to 3.59 million barrels of oil equivalent per day. Analysts had predicted output would be flat.
Shell’s oil refining unit reported a lower-than-expected drop in earnings after crude processing margins fell. Profits from trading energy products and derivatives also fell, although retail margins strengthened, the Hague-based company said.
Excluding one-offs which amounted to a net gain of $75 million, the result was $4.82 billion, well ahead of an average forecast of $4.04 billion in a Reuters poll of seven analysts.