By Fred Pals
July 31 (Bloomberg) -- Royal Dutch Shell Plc, Europe's biggest oil company, said second-quarter profit climbed 33 percent, boosted by record crude prices and higher natural gas.
Net income rose to $11.56 billion, or $1.87 a share, from $8.67 billion, or $1.38, a year earlier, The Hague-based company said today. Excluding gains or losses from holding inventories and one-time items, profit was $7.83 billion, which didn't include additional fair value adjustments of $750 million. The median estimate of 11 analysts surveyed by Bloomberg was for profit of $8.3 billion.
Shell Chief Executive Officer Jeroen van der Veer plans to counter lost output in Nigeria and Russia by mining Canadian oil sands and developing a Qatari gas-to-liquids venture. U.S. oil futures climbed above $140 a barrel for the first time in June and natural-gas prices were 50 percent higher on the year.
``These are a good set of numbers,'' Jason Kenney, an Edinburgh-based analyst at ING Wholesale Banking, said in a telephone interview today. ``Earnings at exploration and production were excellent,'' said Kenney, who has a ``buy'' rating on the stock.
Shell's London-listed Class A shares added 24 pence, or 1.3 percent, to 1,861 pence as of 8:35 a.m. in London. The stock is down 12 percent this year, compared with a 15 percent decline for BP Plc, Europe's second-biggest oil producer, which earlier this week posted a 28 percent increase in profit to $9.47 billion.
Exxon
Exxon Mobil Corp., the world's biggest energy company, may later today report a 26 percent increase in net income to $12.9 billion, the highest ever for a U.S. company without one-time gains, according to the average of seven analyst estimates compiled by Bloomberg.
Of the 34 analysts tracked by Bloomberg who cover Shell, 22 recommend buying the shares, eight advise holding the stock and four say ``sell.''
Overall crude and natural-gas output fell 1.6 percent from a year ago. Including bitumen from oil sands, production averaged 3.126 million barrels of oil equivalent a day.
Shell's output has fallen for the past five years as the company ceded a stake in Russia's Sakhalin-2 venture and militant attacks in Nigeria kept fields offline.
Militant Attacks
The company lost about 160,000 barrels a day in production in Nigeria in the second quarter as militants attacked facilities and blew up pipelines. Shell suspended export obligations for its Bonny Light crude this week after the latest militant raid.
Shell is turning to so-called unconventional projects to replace aging fields as high oil prices encourage energy-rich nations to hold onto a bigger slice of their resources.
Earlier this month, Shell agreed to buy Duvernay Oil Corp. for about C$5.9 billion ($5.8 billion), including assumption of debt, to expand gas output from hard-to-tap formations in western Canada.
Van der Veer said in June he expects to sign oil agreements with Iraq shortly. Iraq has been negotiating technical service contracts with Shell and other oil companies as it seeks to almost double crude output to 4 million barrels a day in the coming years.
Profit at Shell's refining business slid 63 percent in the quarter on higher costs as oil prices outpaced gains in gasoline. Refining margins fell by half to $8.19 a barrel in the second quarter from $16.61 a year earlier, according to BP data.
``It is disappointing mostly because the products division is not performing,'' said Kenney.
((Shell will hold a Webcast presentation, starting at 2 p.m. London time. To register and listen go to http://www.shell.com/home/content/investor-en.
To contact the reporter on this story: Fred Pals in Amsterdam at fpals@bloomberg.net
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