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The Scotsman: Shell poised to boost buy-backs

Shell poised to boost buy-backs
John Bowker Deputy City Editor
The Scotsman – United Kingdom; May 05, 2006

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OIL giant Shell has raised the prospects for more share buy-backs this year on the back of the continually soaring oil price, but it has scrapped a previously key target on future reserves.

Finance director Peter Voser said the firm should be able to hand back more than the dollars 5 billion (GBP 2.7bn) already promised to investors in 2006, as the cost of crude continues to hover around dollars 70 a barrel.

The company was reporting an above expected 12 per cent jump in profits for the three-month period to dollars 6.1bn, despite a 3 per cent fall in worldwide production. The decline was partly put down to disruption caused by last year's hurricanes, and political disruption in Nigeria.

Chief executive Jeroen van der Veer said: “Our overall performance was satisfactory despite operational challenges in the quarter. We are committed to delivering long-term competitive performance – in terms of profit and pay-out.”

But the company said it was no longer aiming at a 100 per cent reserve replacement target over 2004-8 – meaning it may not find as much oil and gas over that period as it is churning out.

This was previously a key measure of the company's performance. Voser cited the fact that the Securities and Exchange Commission does not recognise certain types of hydrocarbons, while the high costs in some areas – such as the Gulf of Mexico – meant the firm may put back some projects until a later date.

In terms of production, the group hopes to bring another 20 billion more barrels of oil on stream by 2010.

Shell said at the end of last year that it would cut future North Sea exploration because of the tax rise by Gordon Brown, but there was no update last night. The group has started production at the Cutter field in the southern North Sea – an operation powered entirely by wind and solar technologies.

The shares rose 8p to 1,868p.

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