Shell Earnings Beat Analyst Estimates on LNG Sales

Peter Voser, CEO of Royal Dutch Shell Plc
Peter Voser, chief executive officer of Royal Dutch Shell Plc. Photographer: Chris Ratcliffe/Bloomberg

Royal Dutch Shell Plc, Europe’s largest oil company, posted earnings that beat analyst estimates for the third straight quarter after a 22 percent increase in liquefied natural-gas sales.

Excluding one-time items and inventory changes, Shell earned $4.9 billion in the third quarter. That beat the $4.3 billion mean estimate of 18 analysts surveyed by Bloomberg.

Chief Executive Officer Peter Voser said Shell is in a “delivery window” for growth after expanding an oilsands venture in Canada and taking final investment decisions on deepwater projects in the Gulf of Mexico and Brazil. Shell is reversing a seven-year decline in output as BP Plc struggles to recover from the worst oil spill in U.S. history.

“This is an excellent set of results,” said Peter Hutton, head of research at NCB Stockbrokers Ltd. in London. “It more than delivers on the expectation of momentum.”

Net income rose to $3.46 billion from $3.25 billion a year earlier, The Hague-based company said in a statement today.

Shell is the first of Europe’s biggest oil companies to report earnings. It will be followed by Total SA tomorrow and BP on Nov. 2. Exxon Mobil Corp., the largest U.S. oil company, is scheduled to report results later today. ConocoPhillips, the third-largest U.S. oil producer, said yesterday that net income more than doubled to $3.06 billion.

Higher Output

Shell is targeting hard-to-reach rock formations in Australia, the U.S. and China, as well as projects in Qatar. Third-quarter production rose 5 percent to 3.058 million barrels of oil equivalent a day from 2.917 million barrels a year earlier.

LNG sales volumes increased to 4.26 million tons, with Shell citing “major contributions” from the Sakhalin II LNG project in Russia and Nigeria LNG.

Shell’s Class A shares traded in London rose 0.5 percent to 1,987 pence as of the 4:30 p.m. close. The stock is up 5.6 percent this year, compared with a 30 percent decline for BP, which at one point lost more than half its market value as the costs of cleaning up the Gulf of Mexico oil spill escalated.

Voser is accelerating asset sales of as much as $8 billion this year and next, and has cut 7,000 jobs and reduced exposure to the less profitable downstream business. Yesterday, Shell agreed to sell most of its refining and marketing business in Sweden and Finland to a major shareholder of Finnish energy company St1 Oy for $640 million.

Canadian Expansion

Last month, Shell started production at the 100,000 barrel-a-day expansion of its Athabasca oil sands development in Canada, while its BC-10 offshore block in Brazil reached production of 95,000 barrels a day. The producer plans to increase production of heavy crude by 60 percent in the Americas through 2020 and also applied to drill a well off Alaska next year. The $19 billion Pearl gas-to-liquids plant in Qatar will be fully operational in the first quarter of 2012.

“Shell is now that much closer to getting Qatar GTL on stream,” said Iain Armstrong, an analyst at broker Brewin Dolphin Ltd. in London. “BP risks getting left in the wilderness.”

Oil futures averaged $76.21 a barrel in the quarter, a 12 percent increase from a year earlier, and natural-gas futures rose 23 percent.

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