Shell profit jumps on oil price rise

City A.M. Reporter
Royal Dutch Shell has beaten forecasts with a 22 per cent rise in first-quarter profit, thanks to higher oil and gas prices and fatter refining margins.

Europe's largest oil and gas company by market value said the current cost of supply (CCS) net income rose to $6.9bn (£4.2bn) in the first three months of the year.

Shell shares were up one per cent in early trading, compared with a flat European oil and gas sector.

In recent years, Hague-based Shell has invested heavily in big new projects such as Qatargas 4, which are beginning to come on stream. Analysts said the effects of these were unlikely to be seen in the company's performance until the second half.

Brent crude was 38 per cent higher in the first quarter compared to the 2010 period, while global refining benchmarks tripled.

Shell, the largest shipper of liquefied natural gas, also benefited from higher LNG prices following the Japanese earthquake, which was expected to lead to higher LNG demand in that country as nuclear power is scaled back.

The Anglo-Dutch company's result compared well with British rival BP, which posted a two per cent fall in replacement cost net profit on Wednesday, on the back of an 11 per cent fall in production after selling assets to pay for the Gulf of Mexico oil spill.

Investec analysts said they expected Shell to continue to outperform BP during 2011.

Italian rival Eni reported a six per cent rise in replacement cost profit, although the result was muted by the weak dollar and a fall in output due to the conflict in Libya.

ConocoPhillips reported a 43 per cent rise in net income.

Shell said oil and gas production for the first quarter fell three per cent compared with the 2010 period, due to divestments.

Stripping out one-offs, CCS earnings were $6.29bn, compared with a forecast for $5.87bn in a Reuters poll.