Shell Profit Beats Analyst Estimates on Higher Gas Earnings

Royal Dutch Shell Plc (RDSA), Europe’s biggest oil company, reported first-quarter results that beat analyst forecasts on higher natural gas earnings. The shares rose the most in two years in London.

First-quarter profit excluding one-time items and inventory changes slipped 3 percent to $7.3 billion from a year earlier, The Hague-based Shell said today in a statement. That beat the $5 billion average estimate of 12 analysts surveyed by Bloomberg.

The results included a record $3.3 billion “underlying earnings” from stronger liquefied natural gas operations, following acquisitions from Repsol SA and related businesses, Chief Financial Officer Simon Henry told analysts. “We saw strong LNG trading environment.” The earnings were partly offset by a $2.3 billion charge related to refineries in Asia and Europe, Shell said.

Shell, which deploys about $80 billion of its capital in North America, has gained from fuel prices that have risen about 36 percent in the continent for the quarter. Chief Executive Officer Ben van Beurden, who took over from Peter Voser this year, in January made the company’s first profit warning since 2004, partly on unprofitable operations in the Americas.

Shell Class A shares rose 2.9 percent to close at 2,347 pence in London, the biggest jump since April 26, 2012.

‘Surprisingly Strong’

“The new CEO set a multiyear journey at Shell to improve returns,” said Bertrand Hodee, an analyst at Raymond James Financials Inc. in Paris. The “results were surprisingly strong. A very good start for the year.”

The Anglo-Dutch company wrote off its Bukom oil refinery in Singapore, part of Asia’s largest chemical, oil-trading, refining and storage center. The charge amounts to 14 percent of Shell’s global asset base, it said.

Refining and marketing has the potential to deliver on average as much as 12 percent return on capital, “more than double current levels, and to deliver around $10 billion of annual cash flow,” Van Beurden said in the statement. “There are substantial pressures on the industry from excess capacity.”

Net income fell to $4.5 billion from $8.2 billion a year earlier, according to the statement. The company pumped 3.25 million barrels of oil equivalent a day in the quarter, compared with 3.56 million barrels a year earlier. LNG sales rose 18 percent to 6.1 million metric tons in the period.

“Earnings were negatively impacted by higher exploration expenses, mainly due to well write-offs, increased costs and higher depreciation,” Shell said. “Earnings also reflected the cap and curtailment” of production at its Dutch project with Exxon Mobil Corp.

Europe Demand

U.K. natural gas prices were about 18 percent lower in the first quarter from a year earlier as milder winter weather in Europe eroded demand. Shell in January forecast first-quarter production would decline 8.5 percent from last year curbed by lower output in the Netherlands, Nigeria and the end of a project in the United Arab Emirates.

Norway’s Statoil ASA yesterday also reported results that beat analyst forecasts, with a 32 percent jump in net income driven by higher U.S. gas prices. London-based BP Plc yesterday said first-quarter adjusted profit fell 24 percent on lower output and refining earnings.

Van Beurden plans to dispose of about $15 billion in assets through 2015 and has so far agreed to sell holdings valued at more than $4.5 billion. The company plans to dispose of some shale-gas fields in the U.S. to return the Americas’ operations to profit.

Gulf Project

Shell sold about $300 million in production assets in the first quarter, which included interests in the Mississippi Lime acreage in Kansas, it said today. It also agreed to dispose of its 50 percent holding in the Niobrara and Sandwash basins in the U.S. to Southwestern Energy Co. for about $90 million.

Shell has started the design of its Appomattox deepwater project in the Gulf of Mexico and an LNG facility in Canada, which will be able to produce as much as 24 million tons of the fuel a year.

In Asia, Shell and Murphy Oil Corp. started pumping oil from the Siakap North-Petai development offshore Malaysia. In Brunei, Shell and Total SA agreed to start work on the Maharaja Lela South project.

To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net

To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net Alex Devine, Randall Hackley

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