Business

Royal Dutch Shell and Exxon profits almost double

  • 29 July 2010
  • From the section Business
Shell tankers
Shell said the business was recovering from the lows seen in 2009

Second-quarter profits at oil giant Royal Dutch Shell have almost doubled after the firm completed a year-long corporate restructuring programme.

The firm reported profits of $4.5bn (£2.9bn) on a current cost of supplies basis, up from $2.3bn a year ago.

Chief executive Peter Voser also defended deep sea oil drilling in the wake of rival BP's massive oil spill in the Gulf of Mexico.

Meanwhile, US oil giant Exxon Mobil reported quarterly profits of $7.6bn.

This was a rise of 85% on the $4.1bn it posted a year earlier. Revenue rose to $92.5bn, 23% higher than the $72.5bn it made a year ago.

The profits are in sharp contrast to crisis hit rival BP who earlier this week reported a record $17bn second-quarter loss. This included a provision of $32bn to cover the costs of the oil spill in the Gulf of Mexico.

Shell's chief executive said the explosion on BP's Deepwater Horizon oil rig in April and the subsequent oil spill had been a tragedy.

However, he added: "Worldwide deep water production has an important role to play in the global energy supply equation, with potential for production growth with supply diversity and sustained investment in technology, jobs and services."

Revamp

In contrast to BP, who suspended dividends for the rest of the year, Shell said it would pay a second quarter dividend of $0.42 per share.

Excluding one-off items, Shell's profit was $4.2bn, compared with $3.1bn last year.

Shell said that its restructuring programme had achieved cost savings of $3.5bn, beating its target by about 15% and some six months ahead of schedule.

It added that as a result of the changes, 7,000 employees would leave the company 18 months earlier than planned.

Shell also said it expected to sell $7bn-$8bn of assets in 2010-11 as it refocuses its portfolio on projects with higher growth potential.

"We continue to see mixed signals in the global economy," Mr Voser said.

"Oil prices have remained firm so far this year, but refining margins, oil products demand and natural gas spot prices all remain under pressure.

"Our earnings and cashflow have rallied from 2009's lows, but the outlook remains uncertain."

The price Shell received for its oil was 41% higher than the same period a year ago, while gas prices were 15% higher.

'Focused strategy'

Richard Hunter, head of UK equities at stockbrokers Hargreaves Lansdown, said Shell's update underlined the "stark difference in fortunes of the UK's two oil majors".

"Whereas its fierce rival BP has been the subject of forced introspection, Shell has continued to drive its own prospects forward," he commented.

"Refining margins are improving, the restructuring programme continues apace and the proposed sale of assets will enable a more focused strategy in the future."

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