Shell makes £2m an hour as oil prices soar

Chief executive Peter Voser says investors and customers stand to gain as profits help pay for dividends and ensure steady supplies
A Shell petrol station
Shell makes £2m profits an hour. Photograph: Ben Stansall/AFP/Getty Images

Shell has produced a barnstorming profit performance in the first quarter of the year, making more than £2m an hour on the back of soaring crude prices.

The oil group's chief executive, Peter Voser, said investors and customers stood to gain as the money helped keep up dividend payments and pay for schemes to ensure steady petrol supplies.

Shell is to sell off $4bn (£2.5bn) worth of lower-performing assets this year, almost double what it previously planned, in an attempt to squeeze more profits out of its oil and gas business.

Shares in the company rose more than 3% to close at £21.95½ as the City reacted positively to an 11% increase in first-quarter earnings of $7.3bn on the same period last year and a small rise in the dividend.

By contrast its US rival ExxonMobil saw an 11% slump in its first quarter profits to $9.45bn. Exxon, the world's largest independent oil company, blamed lower Opec quotas for a 5% fall in production. Wall Street was surprised by the relatively poor performance and the Exxon stock price fell significantly.

Mindful that Shell is making money hand-over-fist when motorists and others are being squeezed by high fuel costs and financial hardship, Voser said: "Our profits pay for Shell's dividends and substantial investments in new energy projects, to ensure affordable, reliable energy supplies for our customers, which create value for our shareholders."

Figures released by the company the day before showed that Shell paid $1.2bn in income tax to the British government and raised a further $17.7bn for the Treasury through the sale of petrol.

Voser said the company had sold $2.4bn worth of assets in the first three months of the year alone. Some of the assets disposed of in the first quarter included offshore stakes in Brazil and Australia plus retail petrol stations in north America and a liquefied petroleum gas (LPG) operation in Malaysia.

These moves would be "enhancing our financial flexibility and capital efficiency, and unlocking new growth potential", said Voser, as he outlined projects that had recently come on stream, such as its Pearl gas-to-liquids scheme in Qatar.

Shell said that it had also spent more than $600m on new offshore acreage in the UK North Sea, Nova Scotia and Tanzania, the latter part of a new oil boom in southern and eastern Africa.

This week Shell received the backing of directors at Cove Energy for its £1.1bn bid to acquire the exploration business, which has an important 8.5% stake in a potentially massive gas find off Mozambique.

The acquisition has raised worries in some sections of the City that Shell could be profligate with all the money that it is pulling in.

Peter Hutton, equity analyst with RBC Capital Markets, said in a research note that "the focus will remain on Shell's capital discipline, a day after it raised its bid for Cove to $2bn (including carry of the capital gains) without indicating an increase in the dividend".

Simon Henry, the finance director of Shell, said that the company was also planning to explore in a "potentially very interesting" undrilled deepwater basin off the coast of South Africa in the hope of finding some kind of connection with the huge discoveries made further north, in locations such as Angola.

Gas, which is viewed as a cleaner substitute for coal as fuel in power stations, has become an increasing focus for both Shell and other big oil companies. Liquefied natural gas sales volumes at Shell rose by 17% to more than 5m tonnes in the first three months of the year as new supplies came out of Qatar and Nigeria.

Henry announced that Shell was also considering the construction of a new gas-to-liquids project, possibly in the US, in Louisiana or Texas, emulating the Qatar  facility.

The company would be seeking to take advantage of the "arbitrage" differential between very cheap US natural gas prices, which have been brought down by shale gas finds, and very high oil prices. Shell would hope, in effect, to refine cheap gas and turn it into much more highly priced liquid fuel. Henry, although enthusiastic about the project, nonetheless insisted that a final investment decision over it was "some way off".

The Anglo-Dutch oil company has also recently revealed that it is pursuing shale gas and shale oil opportunities in China, where it believes there could exist a massive home market if extraction can happen in the right quantities and at the right price.