Shell 2Q Profit Up 40 Pct. on Oil Prices

The Associated Press
Thursday, July 27, 2006; 8:27 AM

AMSTERDAM, Netherlands -- Royal Dutch Shell PLC, Europe's second-largest oil company, said Thursday its second-quarter earnings jumped 40 percent as high oil prices offset production difficulties in Nigeria and the Gulf of Mexico.

Net profit rose to $7.32 billion from $5.24 billion a year earlier. Sales rose less than 1 percent to $83.1 billion from $82.6 billion.

Chief Executive Jeroen van der Veer said in a statement the earnings were "underpinned by overall good operational performance and not simply high energy prices."

Still, the main reason for the increase was higher oil prices, with earnings at Shell's oil exploration and production arm leaping to $4 billion from $2.75 billion, despite an 8 percent drop in production to 3.25 million barrels a day.

Prices for benchmark North Sea Brent crude averaged $69.51 a barrel in the quarter, compared with $51.65 a barrel a year earlier.

That was in line with other major oil companies reporting results this week. BP PLC said its second-quarter profit rose 30 percent to $7.3 billion, while ConocoPhillips reported a 65 percent increase to $5.18 billion. Exxon Mobil Corp., the world's largest publicly traded oil company, is due to report its earnings later Thursday.

Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said it was "good news" that Shell had beaten forecasts, in contrast to BP.

"But going forward, high oil prices will not continue to mask" if Shell's management makes mistakes, he said.

Shell said that excluding the damage caused by militant attacks on its operations in Nigeria and the fallout from hurricanes Katrina and Rita in the Gulf of Mexico, production would have been flat.

Shell is missing around 180,000 barrels per day in Nigeria because of recent attacks, and said Thursday it couldn't confidently predict when production will resume.

Van der Veer said that despite a pipeline rupture this week, possibly due to an attack by militants, the company has no intention of scaling back operations in the West African nation. "We are not afraid to invest in Nigeria," he said.

The Niger Delta region has been the scene of frequent disputes for years between oil companies and communities that demand a greater share of the wealth of Africa's largest crude producer. At least 31 expatriate workers have been held hostage by a variety of militant groups so far this year.

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