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Shell beats estimates amid $1.9 bn writedown on U.S. gas

Eduard Gismatullin

THE HAGUE, Netherlands (Bloomberg) -- Royal Dutch Shell Plc beat analyst second-quarter earnings estimates while pushing ahead with a restructuring program that saw it write off about $1.9 billion in U.S. gas assets.

Profit excluding one-time items and inventory changes gained 33% to $6.1 billion from $4.6 billion a year earlier partly on higher U.S. energy prices, The Hague-based Shell said July 31 in a statement. That beat the $5.6 billion average estimate of 18 analysts surveyed by Bloomberg.

“The impairments we have announced today in Upstream Americas reflect the restructuring of Shell’s resources plays portfolio,” CEO Ben van Beurden said in the statement. “We are taking firm actions to improve Shell’s capital efficiency by selling selected assets and making tougher project decisions.”

Van Beurden, who took over from Peter Voser at the start of the year, is accelerating asset disposals and reviewing spending plans to win investor support. He returned Shell’s operations to profit in the Americas this year, where the company is deploying about $80 billion.

Shell shares rose as much as 2.7%, the biggest intraday gain since April 30, and were up 2.5% at 2,443 pence at 8:18 a.m. in London.

The U.S. gas charge was partly offset by Shell’s disposal of stakes in Australia’s Woodside Petroleum Ltd. and Wheatstone LNG project, the Anglo-Dutch company said. It made a $570 million profit in producing projects in the Americas in the second quarter excluding the impairments, Shell spokesman Jonathan French said by phone.

The company wrote off $2.1 billion in “liquids-rich shales properties in North America” in the second quarter last year.

Higher Prices

U.S. natural gas prices rose 14% and oil climbed 9.4% in the second quarter from last year on higher demand for fuels.

Net income advanced to $5.3 billion from $1.7 billion a year earlier, according to Shell’s statement. The company pumped 3.077 MMboed in the quarter, compared with 3.062 MMboed a year earlier.

BP Plc this week said second-quarter adjusted profit rose 34% after the London-based company started new projects in the Gulf of Mexico and Angola. France’s Total SA said earnings fell 12% amid record low production and a slump in refining margins.

Exxon Mobil Corp. based in Irving, Texas and Houston-based ConocoPhillips report later today.

‘Fix or Divest’

“The new CEO set a multi-year journey at Shell to improve returns,” Bertrand Hodee, an analyst at Raymond James Financials Inc. in Paris, said before the earnings release. “Within the ‘Fix or Divest’ approach, we expect more write-offs” and “tough portfolio choices on development options.”

Van Beurden has already completed about $8 billion in assets sales this year. Shell has set a disposal program of about $15 billion through 2015.

“We have completed a new bottom-up review of our portfolio and strategy,” in Americas’ producing projects, Shell said. “Major divestments of non-core liquids-rich shales positions are now complete.”

In Canada, it agreed to sell its holdings in the Burnt Timber, Hunter Valley and Panther River gas fields and local pipelines to CQ Energy Partnership for about $50 million, Shell said.

The company also named Harry Brekelmans as projects and technology director, taking over from Matthias Bichsel, with effect from Oct. 1.

07/31/2014

 

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