Tags: Royal Dutch Shell | RDSA | oil | energy | stocks

Royal Dutch Shell Drives Margins Higher

By    |   Tuesday, 28 Jun 2011 01:49 PM

Oil prices have fallen about 18 percent from their April peak, with U.S. crude recently trading at $93 a barrel. But that’s still about 21 percent above year-ago levels, which is good news for major oil companies. Royal Dutch Shell (RDSA) is Europe’s largest oil major, and it’s doing just fine. Excluding one-time items and inventory changes, Royal Dutch Shell profit surged 31 percent in the first quarter, to $6.3 billion from $4.8 billion a year earlier, exceeding analysts’ expectations.

Revenue jumped 28 percent to $109.9 billion. The results were strong enough to spark speculation that Shell will increase its dividend as progress continues on its new projects in the second half of the year. The company already sports a juicy dividend yield of 4.90 percent.

"Gearing remains low and, with the expected growth in cash generation from H2 (the second half of) 2011, supports dividend growth from Q1 2012," Citigroup analyst Alastair Syme wrote in a commentary after the earnings report.

Rising oil prices and stronger profit margins in its refining business have fueled the strong performance. Shells adjusted refining earnings more than doubled to $1.65 billion in the first quarter from $778 million a year ago, thanks to higher utilization rates at some of its refineries.

While Shell’s production dipped 3 percent to 3.5 million barrels of oil equivalent a day in the quarter, it approximated last year’s figure once asset sales are discounted.

New projects online

The company targets an increase in output to 3.7 million barrels a day by 2014, helped by projects such as the Pearl gas-to-liquids plant in Qatar and the Qatargas 4 liquefied natural-gas plant.

Analysts see success ahead for Shell. “RDS' size, diversification and technical strength are core strategic advantages which, coupled with future reserve additions from Canadian oil sands, its GTL project in Qatar and its new Marcellus Shale properties, should support solid reserve replacement over the long term,” writes Standard & Poor’s analyst Christine Tiscareno.

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Oil prices have fallen about 18 percent from their April peak, with U.S. crude recently trading at $93 a barrel. But that s still about 21 percent above year-ago levels, which is good news for major oil companies. Royal Dutch Shell (RDSA) is Europe s largest oil major, and...
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2011-49-28
Tuesday, 28 Jun 2011 01:49 PM
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