Shell profits surge 36% to $ 6.3 billion

A major British-Dutch energy company, Royal Dutch Shell said Thursday that its second-quarter profit hiked 36 percent, beating the forecast, as high oil prices and healthy refining margins made up for production declines partly due to violence in Nigeria.

Shell's shares rose $1.30, or 1.8 percent, to close at $ 73.52 on the New York Stock Exchange.

Investors were happy by Shell's reaffirmation that it was sticking to its 2006 and 2007 spending plans, despite rampant sector-cost inflation. "It is a very good performance for Shell ... even though production was lower. High oil prices obviously work well for the company," said Jaap Barendregt of FBS Bankiers.

The oil giant said its net profit on a current-cost-of-supply (CCS) basis, which strips out changes in value of inventories, rose to $ 6.3 billion. Excluding non-operational gains and losses, the profit was $ 6.5 billion, topping an average forecast of $ 6.1 billion from a Reuter's poll of 12 analysts.

Analysts consider the CCS figure, excluding one-offs, is the best measure of Shell's underlying performance.

Shell's results were helped by oil prices, which surged 33 percent compared with the second quarter of 2005, to an average $ 64 a barrel, and a 10 percent hike in gas prices.
Production of oil and gas was less than expected, sinking 8 percent, to average 3.25 million barrels of oil equivalent per day (boepd) in the second quarter, below an average forecast of 3.32 million.

The world's third largest fully publicly traded oil company by market value, Shell slash its 2006 output target, stating its production would be around 3.4 million boepd rather than the 3.5 million to 3.6 million boepd earlier envisaged if outages related to civil strife in Nigeria continue.

However, Shell added the admonition that the new target assumed oil prices at US$ 50, well below current levels. If prices are above US$ 50, Shell will receive even less oil under its production contracts with some resource holding governments, and so output could be under 3.4 million boepd.