Shell posts first-half profit hike while output nearly flat year-on-year
Anglo-Dutch energy major Royal Dutch Shell’s Q2 2006 earnings of US$6.3 billion (EUR 5.0 billion) were up 36% compared with Q2 2005, the company announced on Thursday.
Q2 2006 cashflow from operating activities was up 36.8% to US$11.9 billion compared with US$8.7 billion a year ago, excluding working capital movements and taxation effects. With these taken into account, cashflow from operating activities was up 23.8% to US$7.8 billion year-on-year.
In Shell’s Gas & Power division, first-half earnings for 2006 of US$1.281 billion were up 2.63-fold on the US$487 million posted in first-half 2005, and Q2 2006 earnings of US$516 million mashed the 2005 figure of US$11 million year-on-year. These increases were “driven by LNG prices and marketing and a 15% increase in LNG volumes [quarter-on-quarter] from new train start-ups in Nigeria and Oman”, Shell said. Q2 2006 LNG output reached 2.84 million tonnes (Mt), up 14.5% from 2.48 Mt in Q2 2005. LNG volume sales for the first-half were 5.84 Mt, a 9% rise year-on-year.
The company’s global gas production available for sale increased 2.48% to 257.6 million cubic metres (Mm3) in H1 2006. Q2 2006 output was 0.57 Mm3 down on the 222.8 Mm3 produced in Q2 2005. Natural gas production available for sale into Europe was up 4.1% to 119.9 Mm3 in first-half 2006, the report said, but by quarter, the 85.9 Mm3 bcfd available in Q2 2006 was down 4.4% on Q2 2005. The availability of gas for the Asia-Pacific rose 6.1% to 68.9 Mm3 in first-half 2006, while for the USA it fell 16% to 32.6 Mm3.
Over the first half of 2006, Europe’s realised gas prices averaged US$ 6.83/thousand cubic feet, a near 40% hike averaged in first-half 2005. US prices rose comparatively less dramatically, by 19.2%, to US$ 8.43/Mcf, while the global average rose only 20% to US$ 5.24/Mcf. The Henry Hub average rose 7.3% to US$7.17/Mcf, while the UK NBP increased 54.6% to 52.42p/th.
Exploration & Production segment earnings of US$ 3.99 billion were 46% higher than a year ago, mainly reflecting strong oil and gas price realisations and income tax credits, partly offset by lower volumes and higher costs. Q2 2006 production was 3.253 million boe/day. Excluding the impact of hurricane damage in the Gulf of Mexico, security issues in Nigeria and Production Sharing Contract (PSC) impacts from increased oil prices, production was unchanged versus a year ago.
The industry continues to face “very substantial, serious” cost pressures, which c.e.o. Jeroen van der Veer described in a conference call, “especially in the upstream part of our business”.
Shell has recently taken final investment decisions on gas-to-liquids project in Qatar and its chemical plant, however: “That does not mean there are not other projects where you may see delay. It is too early to say,” Veer said, adding that the question as to whether to delay or even cancel is pervading the whole industry. Capital spending plans for 2006 and 2007 are unchanged at respectively around US$19 billion and US$21 billion respectively.
Normal to high oil inventories worldwide were not translating into lower oil prices due to high geo-political tensions and financial markets investing in oil – tensions can abate by the day and speculators can move out of markets as quickly as they enter, he said, hence: “You may expect quite some volatility in the oil markets.”
As to whether global oil consumption will continue to grow despite current stratospheric prices, Veer said: “They still expect that global oil consumption still goes up by 1 million bbl/day … The growth is less than expected, the remarkable thing is that there is still growth,” mainly from China and India. “In a lot of western markets their reactions to the increase in oil prices is less than expected, but of course we don’t know how much time delay is there,” e.g. the trend for US consumers to buy more fuel-efficient cars, shifting from SUVs to Toyotas. RT
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