LONDON: Royal Dutch/Shell Group, the world’s second largest oil firm, reported a consensus-beating 51% rise in second-quarter profits yesterday, but disappointed the market somewhat by saying it would not buy back any more of its own shares this year.
Shell is the first of the world’s top three oil companies to report second-quarter results. World leader ExxonMobil Corp and No. 3 BP plc will follow next week.
All three have been producing some of the largest quarterly profits ever recorded by publicly traded companies, helped by oil prices that have soared on the back of the war in Iraq and supply disruptions in Nigeria and Venezuela.
Shell’s net profit for the second quarter, adjusted to reflect the current cost of supply, surged to US$3.34bil, helped by higher margins for fuel refining and marketing and higher natural gas prices in the United States. The figure, though, is below the record profit of US$3.9bil the company posted for the first quarter, due to a slight fall in crude oil prices.
Shell said oil prices for the second half of 2003 would depend on the Organisation of Petroleum Exporting Countries' response to the return of Iraqi exports to world markets and on the state of the global economy.
In reaction to Shell's announcement that it would not buy back more shares this year, some analysts speculated that the decision might signal activity on the takeover front. Last year, Shell bought British rival Enterprise Oil.
“The absence of a share buy-back will restart rumours that Shell may be looking to make an acquisition,” said Paul Casson, an investment manager at SVM Asset Management, which controls about 1.5 billion euros in funds.
However, Shell chairman Philip Watts said the decision would help the company save cash to continue growing its dividend above inflation. “We’re committed to our long-term dividend policy, of at least beating local inflation,” he told reporters.
Despite their run of record results, oil stocks have fallen out of favour in recent weeks amid signs of a market downturn.
Shell’s London-listed shares have lost about 1% in value since the start of 2003. They have also underperformed the Dow Jones Global Titans Index, which groups the world’s 50 largest companies, by about 7% in that time. – Reuters
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