London Evening Standard: Huge profits at battered Shell
29 April 2004
Posted 1 May 04
SCANDAL-hit energy giant Shell finally gained respite from its reserves crisis today by stunning the City with huge profits for the first three months of the year and announcing a $2bn (£1.13bn) share buyback.
Shares in the troubled Anglo-Dutch group leapt 12 1/2p to 399 3/4p, catapulting it to the top of the FTSE 100 risers in early trade and a high since it revealed the reserves debacle in January.
Profits rose 9% to $4.2bn for the quarter to March, above City expectations.
Bruce Evers, analyst at Investec, said: 'They have absolutely blown the lights out. These are seriously good numbers and show this is still a very, very strong company.'
Shell's reputation has been torn to shreds since January's shock announcement when the group admitted overstating proven oil and gas reserves by 3.9bn barrels, or 20%. This number has been revised twice and now stands at 4.8bn barrels.
Former chairman Sir Philip Watts and his exploration chief Walter van de Vijver were ousted in disgrace last month and only last week finance chief Judy Boynton was demoted.
There are still fears of criminal charges from a US Justice Department investigation.
Today's figures were boosted by gains from the $348m sale of a minority stake in Chinese oil firm Sinopec, but even without this and other sales, the profit figure of $3.7bn is above the average analyst forecast. Shell's rival BP posted a comparable ;clean' figure of $3.5bn two days ago.
Shell put the gains down to high oil and gas prices, strong refining margins and improving trading conditions in the chemicals market.
Total oil and gas production was down 3%, as expected, but still almost 4.1m barrels a day, marginally ahead of BP.
New chairman Jeroen van der Veer said: 'It is good to see that we have continued to deliver satisfactory results and cash generation despite issues relating to reserves.'
Van der Veer added capital investment in the group's exploration and production arm would be $2bn higher at $15bn this year, with some spending diverted into short-term 'payback projects'. Exploration activity has also increased as Shell looks to bring more reserves into its portfolio.
Despite the higher spending commitment, Shell said it should be able to spend at least $2bn on share buybacks this year. The group's free cashflow in the first quarter alone was a massive $3.8bn.
'This will remind people there's a lot more to Shell than just reserves,' one analyst said.