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Shell Profit Beats Estimates as Asset Sales Target Raised

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April 26 (Bloomberg) -- Royal Dutch Shell Plc, Europe’s biggest oil company, reported first-quarter earnings that beat estimates, and raised a target for asset sales this year.

Excluding one-time items and inventory changes, Shell posted profit of $7.28 billion, compared with the $6.7 billion average estimate of eight analysts surveyed by Bloomberg. The shares rose the most since November in London trading.

Chief Executive Officer Peter Voser said asset sales this year will probably be in excess of $4 billion, compared with earlier expectations of $2 billion to $3 billion. The company generated additional cash in the quarter from new projects in Canada’s Athabasca oil sands and Qatar as Brent crude traded 12 percent higher than a year earlier.

“The record result in upstream was driven by volumes from the growth projects,” said Stuart Joyner, an analyst at Investec Securities Ltd. in London.

Shell’s Class A shares gained 3.2 percent to 2,195.5 pence in London. The stock is down 7.4 percent this year.

Net income of $8.72 billion compared with profit of $8.78 billion a year earlier, The Hague-based Shell said today in a statement. About $2.4 billion of assets were sold during the quarter.

The company is the first of Europe’s biggest oil producers to publish earnings; Total SA and BP Plc release results on April 27 and May 1, respectively. The U.S.’s Exxon Mobil Corp. will report today.

Brent Gains

Brent crude averaged $118.45 a barrel in the first quarter, compared with $105.52 a year earlier. That helped counter a decline in U.S. natural-gas prices, which sank to their lowest quarterly average in 10 years.

“Energy demand fundamentals are robust, but with near-term volatility in energy prices as a result of economic and political events,” Voser said.

Shell agreed to sell 15 percent of its Prelude LNG venture off Australia to Korea Gas Corp. and CPC Corp. of Taiwan, on top of the 17.5 percent offered to Japan’s Inpex Corp. The combined 32.5 percent interest was worth about $500 million at the end of March, Shell said.

It also completed sales of liquefied petroleum gas operations in the Asia-Pacific region and filling stations in North America and Africa.

Higher Output

Oil and gas production rose to 3.55 million barrels a day from 3.50 million barrels a year earlier. Shell plans to raise output to about 4 million barrels a day as soon as 2017.

Voser agreed in February to raise the dividend this year for the first time since 2009 on a forecast for a 50 percent increase in cash flow from operations through 2015.

The company has boosted output at its oil-sands project in Canada’s Alberta region and expects its Pearl gas-to-liquids venture in Qatar to reach full capacity by the middle of the year. Shell is also expanding in East Africa, where it agreed to buy Cove Energy Plc this week for about $1.8 billion.

Cove has a stake in a gas block off Mozambique, which may connect to a proposed liquefied natural gas plant that would process the fuel for Asian markets. Shell, the world’s largest LNG supplier, has interests in about a quarter of the LNG ships in operation.

Shell forecast global LNG supply would rise to more than 500 million tons a year, up from 240 million tons now, Chief Financial Officer Simon Henry told investors. The company plans to maintain its market share, which is about 8.8 percent.

LNG prices have been supported by an increase in Asian imports as Japan shut down nuclear reactors in the wake of the Fukushima disaster last year. Shell increased LNG sales 17 percent to 5.2 million tons in the quarter from last year.

“The refining activities still made losses of about $200 million, while trading and chemicals performed like last year,” Jean-Charles Lacoste, an analyst at Credit Agricole Cheuvreux SA, wrote in an e-mailed report.

Of the 29 analysts that cover Shell, 17 recommend buying the shares, 11 have hold ratings and one advises selling.

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

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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