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Daily Telegraph: Questor: Shell shows more signs of rejuvenation but a deal with BP still looks a non-starter

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Last Updated: 2:13am BST 27/07/2007

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£19.72 -42p
Questor says Hold

The sixth straight quarter in which Royal Dutch Shell profits exceeded market forecasts is more confirmation for those who believe chief executive Jeroen van der Veer’s rejuvenation of the oil major is under way.
  
The refining and marketing side is very strong, as is the chemicals arm. Profit from the oil products division, which handles refining, leapt 42pc to a record $2.94bn. Record US gasoline prices have been driven by rising demand and refinery shutdowns.

Exploration and production profits fell 17pc, reflecting lower output and lower crude prices, but was largely expected.

Production – at 3.18m barrels of oil equivalent per day (boepd) – was down 2pc due largely to a 6pc decline in gas volumes and lost output in Nigeria.

The 2007 production forecast was maintained at 3.3m to 3.5m boepd, although it is likely to be at the lower end of that range.

Production was 3.47m a day last year, and a decline in the 2007 output would be the fifth straight drop.

Shell could give no guidance when full production would re-start in Nigeria, where rebels have kidnapped oil staff and disrupted operations.

In the long term, Shell is looking to boost production through projects such as oil sands in Canada, a gas-to-liquids plant in Qatar and, possibly, a controversial gas project in Iran.

A question is whether these will be brought up to speed at the rate Shell’s mature assets go into decline.

Acquisitions are an obvious way to rebuild its reserve base, though the Big One – a deal with BP – looks a non-starter.

Shell’s shares have risen 13pc this year, against a 5pc gain for BP, on the back of improved sentiment about the robust downstream and chemicals businesses.

There has been some profit-taking of late but yesterday’s number will continue to underpin the share price.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/07/27/cxquest127.xml

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