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THE WALL STREET JOURNAL: Shell Posts 60% Rise in Net Income On Higher Oil Prices, Divestments

By BENOIT FAUCON
January 31, 2008 3:35 a.m.

LONDON — Royal Dutch Shell PLC Thursday reported a 60% rise in fourth-quarter net profit as higher oil prices and divestments outweighed tighter refining margins and a lower output.

Shell’s results underscore how oil companies are defying the global economic gloom. U.S. crude peaked at about $100 a barrel early January. (See related article.)

The Anglo-Dutch firm, the world’s fourth-largest publicly-listed oil company by market capitalization, said net income for the three months ended Dec. 31 was $8.47 billion, or $1.36 a share, compared with $5.28 billion, or 83 cents a share, a year earlier. Results included a net gain of $963 million, compared with a year-earlier gain of $515 million. The latest figures also reflect tax-rate changes in Canada and Italy, and divestments in the company’s exploration and production unit.

Annual profit rose 23% to $31.3 billion from $25.4 billion, breaking a new record. Fourth-quarter revenue rose 41% to $106.7 billion from $75.5 billion.

Shell’s quarterly “clean” current cost of supplies, which strips out exceptional items and the impact of inventory gains and losses from the bottom line, stood at $5.72 billion from $5.5 billion. Analysts had expected costs of $5.83 billion.

Profit was driven by a 47% year-to-year rise of the average United Kingdom North Sea crude benchmark Brent in the fourth quarter. The rise in crude prices more than offset a 14% drop in global industry refining margins.

Earnings were hurt by maintenance downtime at the 458,000 barrel-a-day Pulau Bukom refinery in Singapore and a fire at its 155,000 barrel-a-day Scotford Upgrader at Canada’s Athabasca Oil Sands Project in November. Partly as a result, production of oil and natural gas averaged 3.44 million barrels of oil equivalent a day in the fourth quarter, up from 3.65 million barrels of oil equivalent a day a year earlier.

Shell’s numbers conform to international financial reporting standards, or IFRS, which differ from U.S. generally accepted accounting principles.

Write to Benoit Faucon at [email protected]

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