BLOOMBERG: Shell Canada 2nd-Qtr Profit Rises to Record C$526 Mln (Update3)

July 21 (Bloomberg) -- Shell Canada Ltd., Canada's fourth- largest oil and natural-gas producer, said second-quarter profit jumped 85 percent to a record amid soaring energy prices and increased oil-sands output.

Net income surged to C$526 million ($432.5 million), or 63 cents a share, from C$285 million, or 34 cents, a year earlier, the Calgary-based company said today in a statement. Sales climbed 28 percent to C$3.39 billion.

Output of bitumen, an extra-heavy crude extracted from northern Alberta's oil-soaked sands, increased 16 percent to 98,500 barrels a day, Shell Canada said. That was Shell Canada's share of production from its 60 percent stake in the Athabasca oil-sands venture. The increase helped cut per-barrel operating costs by 2.5 percent and made up for a drop in gas production.

``Oil-sands are a beneficiary of both record production and record prices,'' said Wilf Gobert, an analyst at Peters & Co. in Calgary who rates Shell Canada's shares at sector perform and doesn't own any.

Synthetic crude processed from bitumen sold for an average of C$54.44 per barrel in the second quarter, up from C$44.68 a year earlier, the company said.

Shares of Shell Canada rose 14 cents to C$35.20 at 12:37 p.m. in Toronto Stock Exchange trading. The stock has climbed 33 percent this year.

Insurance Gain

Shell Canada's oil-sands profit almost tripled, rising to C$264 million from C$96 million. Earnings included an $82 million gain from insurance payments related to a January 2003 fire that delayed Athabasca's production.

Second-quarter profit also included a C$40 million accounting gain related to an affiliate acquired last year, Shell Canada said.

Excluding the one-time gains and stock-based compensation costs of C$38 million, Shell Canada earned 53 cents a share. That was 2 cents higher than the average prediction from five analysts surveyed by Thomson Financial.

Gas sales by volume fell 11 percent to 481 million cubic feet a day because of declines at aging fields off the coast of Nova Scotia and in Western Canada, Shell Canada said.

Refining and retailing earnings increased 16 percent to C$128 million, partly on higher utilization of a Montreal plant, the company said.

Record Profit

The company's previous quarterly profit record was C$451 million, set in last year's third quarter, Shell Canada spokeswoman Jan Rowley said.

In a separate statement today, Shell Canada said it would raise its quarterly dividends by 8 percent to 9 cents a share, effective with the Sept. 15 payout to shareholders of record as of Aug. 15.

San Ramon, California-based Chevron Corp. and Calgary-based Western Oil Sands Inc. each own 20 percent of the Athabasca venture. The bitumen is processed into synthetic crude at an Edmonton, Alberta, plant and sold to refiners to make into gasoline and other fuels.

Europe's Royal Dutch Shell Plc owns about 78 percent of Shell Canada's stock. In addition to the oil-sands project, Shell Canada has gas wells in Western Canada and a national chain of fuel stations.

Imperial Oil Ltd., EnCana Corp. and Petro-Canada are Canada's largest oil companies, ranking ahead of Shell Canada.

To contact the reporter on this story:

Ian McKinnon in Calgary imckinnon1@bloomberg.net.

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