The Scotsman: Embattled Shell lifted by 9% rise in profits
29 April 04
THE tide appeared to turn in Shell’s favour today as the troubled oil giant cheered analysts by reporting a nine per cent hike in quarterly profits.
The company, which has seen its reputation battered by a series of oil reserve downgrades, also bowed to investor pressure and restarted its share buyback programme.
Net profits for the first three months of the year rose ahead of market expectations to some £2.4 billion - despite the company recording a decline in oil output.
Shell said it was restarting its share buyback programme, with just over £1.1bn to be spent on buying its own stock this year.
The City reacted positively to the news and shares in the oil giant were marked up two per cent at 394.5p in morning trade.
Shell chairman Jeroen van der Veer said the upturn in profitability had been delivered against the "extraordinary challenges" posed by the shock downgrades of its reserves in the quarter.
The Anglo-Dutch firm is still reeling from the January disclosure that its oil and gas stocks were 20 per cent lower than previously thought. It has since restated its reserves a further two times.
The debacle over reserves, a key measure of oil company value, has claimed the scalps of several top executives, including chairman Sir Philip Watts, and prompted regulatory probes and class action lawsuits on behalf of shareholders.
Executives were criticised in a report last week that revealed they had known since 2001 that reserves had been overbooked.
Shell said its performance over the period under review reflected buoyant oil prices and improved earnings in gas and power, oil products and chemicals. Crude oil prices hit a four-year high of $34.78 last night.
Mr van der Veer said: "It is good to see we have continued to deliver satisfactory results and cash generation despite all the issues relating to reserves."
Analysts said that like rivals BP and ConocoPhillips, which reported top-of-the-range results earlier this week, Shell had done surprisingly well in United States fuel refining and marketing. On output though, Shell compares less favourably with BP. Total oil and gas production fell three per cent on a year ago compared with BP’s 11 per cent rise.
Investors have been pressing Shell for months to join its peers in buying back shares. The initial sum for 2004, however, is small compared with others in the sector.
©2004 Scotsman.com
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