Thursday, February 3, 2011

Shell Net Income Rises on Higher Oil Prices, Output

(Bloomberg) -- Royal Dutch Shell Plc, Europe’s biggest oil company, said fourth-quarter profit tripled on higher oil prices as it starts projects from Qatar to Brazil.

Net income increased to $6.79 billion from $1.96 billion a year earlier, The Hague-based company said in a statement today. Excluding one-time items and inventory changes, Shell missed analyst estimates.

“Shell is bringing onstream the projects that it has invested in, and is reaping the benefits in terms of profit growth,” said Dirk Hoozemans, who helps manage the equivalent of $21 billion at Rotterdam-based Robeco Group.

Chief Executive Officer Peter Voser is ramping up production with a $100 billion investment plan. This year, Shell will start the Pearl gas-to-liquids and Qatargas 4 liquefied natural-gas ventures in the Middle East, helping to boost output to the equivalent of 3.5 million barrels of oil a day in 2012.

Excluding one-time items and inventory changes, Shell earned $4.1 billion. That missed the $4.7 billion mean estimate of 16 analysts surveyed by Bloomberg.

Close rival BP Plc posted adjusted profit of $4.4 billion earlier this week, missing analysts’ expectations of $5 billion. Exxon Mobil Corp., the world’s largest company, reported its highest quarterly net income in more than two years of $9.25 billion.

Full-year production at Shell rose 5.5 percent to 3.314 million barrels of oil equivalent a day, up from 3.142 million barrels in the year-earlier period.

Brent oil averaged 16 percent more in the fourth quarter than the year-earlier period. U.K. natural-gas prices were 88 percent higher.

Reverse Decline

Shell last year has managed to reverse a seven-year drop in production after starting projects in Brazil, Nigeria, Canada and the Gulf of Mexico. It has been assessing more than 35 projects to maintain output growth until 2020. Shell has estimated cash flow will grow 80 percent in the three years to 2012 with oil averaging $80 a barrel.

“Shell offers a good level of portfolio depth to underpin longer-term growth aspirations,” Alastair Syme, a London-based analyst at Citigroup Inc., wrote in a report. “Much of this growth is front-end loaded in the 2011-13 timeframe as the company starts to enjoy the fruits of what has been a heavy investment program.”

Of the 36 analysts that cover Shell, 27 recommend buying the shares, eight have “hold’ ratings and one advises investors to sell the stock.

BP expects production to fall 11 percent to about 3.4 million barrels a day of oil equivalent this year, partly after delaying projects in Alaska and the Gulf of Mexico following the worst oil spill in U.S. history.

In October, Shell said it expected to book charges in the fourth quarter arising from disruptions to drilling in the Gulf of Mexico. Production from the region, which accounts for about a third of Shell’s total production in the Americas, will be 40,000 barrels less a day than previously expected this year.

--Editors: Stephen Cunningham, Jonas Bergman.

To contact the reporter on this story: Eduard Gismatullin in London at

To contact the editor responsible for this story: Will Kennedy at

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