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Shell 3Q profit soars
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November 2, 2000: 8:24 a.m. ET
High crude oil prices boost earnings by 80% at world's No. 2 oil company
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LONDON (CNNfn) - Royal Dutch/Shell Group said Thursday third-quarter profit rocketed 80 percent, powered by higher gas prices, improved refining margins and cost-saving measures.
The world's second-biggest oil company said net income, excluding one-time items, rose to $3.25 billion from $1.81 billion in the year earlier period. Analysts polled by Reuters had forecast earnings between $3.1 billion and $3.5 billion.
Schroder Salomon Smith Barney oil analyst Mark Iannotti told CNNfn.com the company will have "a great fourth quarter, with 6-7 weeks to go and crude oil prices holding at around $30. The company will see a huge cash bonanza of about $3.5 billion at the bottom line."
 Brent crude prices have averaged $30.45 a barrel over the quarter, up from $20.60 a barrel in the same period a year ago. A decline in heating oil stocks in the United States and the clashes in the Middle East between Israeli forces and Palestinians have kept prices high.
U.S. rivals Exxon Mobil Corp. (XOM: Research, Estimates) and Texaco Inc. (TX: Research, Estimates) recently reported near doubling of 3Q profits. BP Amoco PLC (BP-), the world's No. 3, reports earning on Nov. 7.
"These are exceptional results driven by an exceptional oil price," Royal/Dutch Shell Group chairman Mark Moody-Stuart said. "I have no doubt there will be leaner periods in the future."
The company said crude oil prices rose despite the efforts of OPEC to increase oil production. The Organization of Petroleum Exporting Countries, which exports about 40 percent of the world oil, has hiked production four times this year to curb surging oil prices. The last production increase of 500,000 barrels a day came earlier this week.
Shell warned that crude prices should fall next year.
"If the further production increases implemented by these countries in October are sustained, oil stocks can be expected to build once the winter demand has passed, so causing a downward pressure on crude prices next year," the company said.
Shell has also benefited from a major cost cutting program implemented since December 1998, when oil prices hit a low of about $10 a barrel. Moody Stuart said it was on track to deliver and achieve the cost targets set two year ago.
"The cost performance and growth have been excellent this year and we are planning to drive down costs and grow the business," Moody-Stuart.
 Shares in Shell Transport & Trading Co. (SHEL), which owns 40 percent of Royal Dutch/Shell Group, fell 18 pence, or 3.2 percent, to 544 pence in London. Royal Dutch Petroleum Co. of the Netherlands, which owns the remainder of the company, dropped  2.58, or 3.7 percent, 67.95 in Amsterdam.
"The market's a bit disappointed that earnings have come in at the bottom end of expectations," according to Iannotti. "Investors are looking for an excuse for removing money out of defensive stocks, such as oils that have benefited over the last few months," while technology stocks have taken a pummeling after a set of disappointing results and profit warnings.
Schroder's Iannotti, who has an "outperform, low risk" rating on the stock, expects Shell Transport's share price to hit 635 pence in 12 months.
Exploration profit jumps 99%
The company said earnings at its exploration and production business almost doubled to $2.31 billion, from $1.16 billion a year ago.
"This was not only due to higher oil and gas prices, but also to higher volumes and lower operating costs", Shell said. Production of oil rose 5 percent and 8 percent for gas.
Profit from its Oil Products unit, which makes and markets fuel products, jumped 50 percent to $642 million. "Stronger refining margins and lower costs offset a decline in marketing margins," the company said.
Earnings at Shell's Downstream Gas and Power arm surged to $152 million from a loss of $1 million in the year earlier period. 
--from staff and wire reports
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