LONDON (Reuters) - Royal Dutch Shell beat all forecasts with third-quarter current cost of supply (CCS) net profit up 71 percent at $10.9 billion (6.5 billion pounds), as high oil prices and asset sales outweighed a 7 percent drop in oil and gas production.
The world’s second-largest non-government controlled oil company by market value said on Thursday it was well placed to continue paying dividends and investing, even at lower energy prices.
“A good performance, all divisions have performed well. The big driver seems to be the downstream. It was much better than expected,” said Alexandre Weinberg, analyst at Petercam.
However, Shell shares fell as investors focussed on the weaker-than-expected production figures.
London-listed “A” shares traded down 2 percent at 1,671 pence at 8:57 GMT, compared with a 1.3 percent drop in the DJ Stoxx European oil and gas sector index.
“With production declines remaining a concern at Shell, at a time when BP’s operational performance is finally turning, we suggest that there is not enough in these numbers to reverse recent performance (share weakness),” Citigroup said in a research note.
Shell benefited from a 54 percent rise in crude in the third quarter compared with the same period last year.
However, prices have dropped to around $70/barrel from a record above $147/bbl in July, raising fears oil companies may not be able to continue raising their generous dividends.
Shell said production of oil and gas fell to 2.93 million barrels of oil equivalent per day in the quarter, due to hurricane outages in the Gulf of Mexico, a dearth of new field startups and the impact of production sharing contracts under which it receives less oil from projects when prices rise.
While the upstream oil and gas production unit is always the main profits driver, Citigroup said the smaller downstream division, which refines crude and markets fuel to users, was the “standout” performer in the quarter.
Profits in the division rose 40 percent thanks to higher refining margins in Europe, strong sales of jet fuel and diesel to commercial customers.
Earnings from retailing fuel to motorists fell, a spokesman said, as the company suffered lower sales and found it hard to pass on high fuel prices to customers.
The Anglo-Dutch company said on Wednesday that Chief Financial Officer Peter Voser would succeed Jeroen van der Veer as Chief Executive in July next year.
“His strong track record and conservative financial management should be an asset in this period of greater economic uncertainty,” Weinberg said.
Shell said the CCS result, which strips out unrealised gains or losses related to changes in the value of fuel inventories, included a gain of $2.06 billion due to one-off items, mainly the sale of a German gas network, and non-cash gains of $800 million.
Excluding these items, the CCS net profit was $8.04 billion, ahead of an average forecast of $7.195 billion from a Reuters poll of six analysts.
Editing by David Cowell