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Shell gets crude boost
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February 10, 2000: 7:05 a.m. ET
Energy firm's 4Q earnings surge on crude price rise, cost cuts
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LONDON (CNNfn) - The booming price of crude oil and a major cost-slashing exercise provided a big boost to fourth-quarter earnings at Royal Dutch/Shell, the world's third-largest oil company, the company announced Thursday.
The Anglo-Dutch firm said net income in the three months to the end of December was $2.58 billion compared with a loss of $3.74 billion in the same period of 1998. The earnings were toward the top end of expectations, and Shell stock rose almost 3 percent to 429 pence in London.
Excluding one-time items, current cost income in the quarter -- the standard measure of oil company profitability -- more than doubled to $2.24 billion from $818 million. The consensus forecast was around $2.1 billion.
Revenue in the quarter rose 27 percent to $43.8 billion and earnings per share for the U.K. arm, Shell Transport & Trading (SHEL) rose to 6.4 pence from a loss of 9.4 pence last year.
During the quarter, the price of crude averaged $24.15 a barrel -- more than double the average for the final three months of 1998. That boosted the contribution from its exploration and production arm more than five-fold to $1.66 billion.
The flipside of the rising crude price was the relatively poor showing of the refining and marketing division, which suffered falling margins in all its global businesses.
Shell said price movements were "unpredictable," but it was confident the price would remain at least in the $15-$20 range.
Profit virtually halved in the quarter to $239 million from $530 million. Price rises for refined products lag price increases for crude oil, crimping margins. Shell held out some hope for an improvement in refining margins in Europe and North America over the year ahead, but said conditions in Asia remained unhelpful due to over capacity.
Shell plans to slash $4 billion from its operating cost base by 2001, and the company noted it was ahead of schedule, trimming $2 billion from costs during 1999, with $500 million of that coming from its exploration budget.
Part of the cutback is a radical re-appraisal of its investment spending. For the whole of 1999 the company invested $9.5 billion, 40 percent less than in 1998.
For the whole of 1999, Shell reported an 8 percent revenue rise to $149.7 billion, while adjusted current cost income was $7.1 billion, up 38 percent versus the $5.15 billion earned in 1998. Full-year earnings per share for Shell were 21.4 pence compared with 0.5 pence for 1998. 
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Royal Dutch/Shell
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