Royal Dutch Shell Plc became the latest oil company to report sharply lower first quarter profits due to a halving of the crude price, while beating analysts forecasts as trading activity flourished.
Shell said on Wednesday its current cost of supply (CCS) net income, which strips out unrealised profits or losses related to changes in the value of inventories, fell 58 percent compared to the same period in 2008, to $3.30 billion. That compares with a drop of 62 percent at rival BP Plc and an 80 percent drop at US oil major ConocoPhillips.
Shell's London-listed "A" shares rose 1.1 percent to 1,557 pence at 1239 GMT, compared to 0.24 percent rise in the DJ Stoxx European oil and gas sector index. Citigroup oil analyst Mark Bloomfield said the figures were helped by strong oil trading results which may not be repeated. Europe's largest oil company by market value said production of oil and gas fell 3.6 percent to average 3.40 million barrels of oil equivalent per day (boepd) in the quarter.
Chief Financial Officer Peter Voser, who takes over as Chief Executive in July, said outages in Nigeria, related to civil unrest and theft, amounted to a cut of 90,000 boepd above the outages suffered in the first quarter of 2008. Nigeria's Finance Minister Mansur Muhtar said last month oil production so far this year had been averaging around 1.6 million barrels per day, almost half the country's installed capacity of 3 million bpd, partly due to the unrest.
Nonetheless, Voser said the rejuvenation of Shell's production base was proceeding and was on track return to growth next year. Brent crude averaged around $44 per barrel in the quarter compared to $97 a year ago, hitting earnings at the core upstream oil and gas production unit. Most other areas of the Hague-based company's business also suffered, with big profit drops in oil refining and fuel retailing and a swing to loss in petrochemicals.
The sharpest reversal in percentage terms was in Shell's oil sands unit, which squeezes crude from bitumen-drenched soil in Alberta, a high-cost activity hit hard by lower oil prices. This unit swung to a $42 million loss from a profit of $249 million in the first quarter of 2008.
However, echoing the performance of BP and ConocoPhillips, Shell said profit from taking bets on the oil and gas markets rose, although Voser would not say by how much. The current contango in the crude market, whereby forward oil prices are above current prices, coupled with low rates for hiring oil tankers for storage, is creating an arbitrage opportunity for oil traders.
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