Shell leaves BP in the shade with bumper Q1

The oil giant benefits from high oil prices to bounce back from a disappointing 2010. But it has a way to go yet.

by Emma Haslett
Last Updated: 17 Oct 2011
As arch-rival BP continues to feel the after-effects of the Gulf of Mexico disaster, Shell has been merrily cashing in on the soaring oil price: after stripping out one-off costs, the oil giant said today that its first-quarter profits were up 30% to $6.3bn, well ahead of the $5.9bn the City was expecting. With CEO Peter Voser's efforts to boost production and increase margins apparently starting to bear fruit too, it looks like Shell is recovering well after a slightly dodgy period. BP must be looking on enviously...

Despite those impressive profits, it wasn’t all good news from Shell today: production during the quarter slipped by 3%, to 3.5m barrels a day. But Voser insists his $100bn investment programme, which aims to boost production to 3.7m barrels a day by 2014, will solve that problem. Much of this money will go into liquefied natural gas ventures in the Middle East, an area where Shell is a world leader. And some analysts argue that if the events in Japan undermine confidence in nuclear power, there could be a spike in demand for LNG - leaving Shell well placed to cash in.

The near-40% rise in the oil price during the last year is clearly the main reason why Shell's margins are looking much healthier (and the fact that unlike BP, which posted a 2% drop in profits yesterday, it doesn't have a major clean-up job to pay for). But Voser's restructuring and cost-cutting efforts also seem to have helped the bottom line: he's already identified $1bn worth of cost savings and sold off more than $3bn worth of lower-margin assets.

Analysts certainly seem impressed by what they're seeing from Shell - and there's no doubt that it looks even more attractive to investors in the light of BP's woes. The question now is whether Voser's investment programme really can deliver on the production front...

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