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Shell profit beats analyst estimates on higher gas earnings

EDUARD GISMATULLIN

THE HAGUE, Netherlands (Bloomberg) -- Royal Dutch Shell Plc reported results that beat analyst forecasts on higher natural gas earnings. The shares rose the most in two-and-a-half years in London trading.

First-quarter profit excluding one-time items and inventory changes fell 3% to $7.3 bn from a year earlier, The Hague-based Shell said in a statement. That beat the $5 bn average estimate of 12 analysts surveyed by Bloomberg.

The results benefited from stronger LNG operations following acquisitions from Repsol SA and “higher gas realizations and gas-trading results,” Shell said. The earnings were partly offset by a $2.3 bn charge related to refineries in Asia and Europe.

Shell, which deploys about $80 bn of its capital in North America, has gained from fuel prices that have risen about 36% in the continent for the quarter. CEO Ben van Beurden, who took over from Peter Voser this year, in January made the company’s first profit warning since 2004, partly on unprofitable operations in the Americas.

Shell Class A shares rose as much 4.4% to 2,381 pence, the biggest intraday jump since Oct. 5, 2011. The stock was up 3.7% at 2,363.5 pence at 9:23 a.m. London time.

“The new CEO set a multiyear journey at Shell to improve returns,” said Bertrand Hodee, an analyst at Raymond James Financials Inc. in Paris. The “results were surprisingly strong. A very good start for the year.”

The Anglo-Dutch company wrote off its Bukom oil refinery in Singapore, part of Asia’s largest chemical, oil-trading, refining and storage center. The charge amounts to 14% of Shell’s global asset base, it said.

Refining and marketing has the potential to deliver on average as much as 12% return on capital, “more than double current levels, and to deliver around $10 bn of annual cash flow,” Van Beurden said in the statement. “There are substantial pressures on the industry from excess capacity.”

Net income fell to $4.5 bn from $8.2 bn a year earlier, according to Shell’s statement. The company pumped 3.25 MMboed in the quarter, compared with 3.56 million barrels a year earlier. LNG sales rose 18% to 6.1 million metric tons in the period.

“Earnings were negatively impacted by higher exploration expenses, mainly due to well write-offs, increased costs and higher depreciation,” Shell said. “Earnings also reflected the cap and curtailment” of production at its Dutch project with Exxon Mobil Corp.

UK natural gas prices were about 18% lower in the first quarter from a year earlier as milder winter weather in Europe eroded demand. Shell in January forecast first-quarter production would decline 8.5% from last year curbed by lower output in the Netherlands, Nigeria and the end of a project on the United Arab Emirates.

Norway’s Statoil ASA yesterday also reported results that beat analyst forecasts, with a 32% jump in net income driven by higher U.S. gas prices. London-based BP Plc yesterday said first-quarter adjusted profit fell 24% on lower output and refining earnings.

Van Beurden plans to dispose of about $15 bn in assets through 2015 and has so far agreed to sell holdings valued at more than $4.5 bn. The company plans to dispose of some shale-gas fields in the U.S. to return the Americas’ operations to profit.

Shell sold about $300 million in production assets in the first quarter, which included interests in the Mississippi Lime acreage in Kansas, it said today. It also agreed to dispose of its 50% holding in the Niobrara and Sandwash basins in the U.S. for about $90 million to Southwestern Energy Co.

Shell has started the design of its Appomattox deepwater project in the Gulf of Mexico and an LNG facility in Canada, which will be able to produce as much as 24 million tons of the fuel a year.

In Asia, Shell and Murphy Oil Corp. started pumping oil from the Siakap North-Petai development offshore Malaysia. In Brunei, Shell and Total SA agreed to start work on the Maharaja Lela South project.

04/30/2014

 

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