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Shell reports profits rise
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August 2, 2001: 6:43 a.m. ET
Europe's largest oil company sees net income rise 12 percent
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LONDON (CNN) - Shell, Europe's largest oil company, reported its net income rose 12 percent in the second quarter, helped by higher average oil prices.
The Anglo-Dutch company said profit for the three months to June 30 rose to $3.6 billion from $3.2 billion a year earlier. Earnings were in line with the forecasts of analysts polled by Reuters.
However, production growth was below experts' expectations at just 1 percent compared with Shell's target of 5 percent and 3 percent in the first quarter.
Investors are placing increasing emphasis on growth in production, as recent industry-wide efforts a to cut costs have narrowed the scope for further profit increases from this source.
Shares in the world's second-largest publicly traded oil producer have come under pressure along with its competitors after crude prices fell around 14 percent in the past two months as demand weakened.
Brent crude prices averaged $27.40 a barrel in the second quarter compared to $26.90 a barrel a year ago, but slipped towards the end of the quarter.
Shares in Royal Dutch dropped 2 percent in Amsterdam around midday Thursday, while Shell T&T (SHEL) was down 3.2 percent, topping the list losers on London's FTSE 100.
Shell T&T announced it would raise its half-yearly dividend to 5.85 pence per share from 5.7 pence, while Royal Dutch paid 0.7 euros, up from 0.67.
The oil industry is also facing mounting criticism from environmentalists amid growing concern over global warming. Shell's profit statement, for example, coincided with media reports that police in Brazil had accused Shell of commiting environmental crimes in the south American country.
The accusations follow a police inquiry into the pollution of earth and underground water around a pesticide factory in Paulinia, 80 miles (130 km) from Sao Paulo, during the 1970s and '80s, Britain's Guardian newspaper reported.
The region's health secretary, Claudia Guerreiro, told the newspaper that nearly three quarters of the 200 people living near the factory had been affected by the pesticides, which she said had caused irreversible damage to some, particularly children.
Such concerns may mean Shell will be excluded from the FTSE's new ethical index, FTSE4Good.
A Shell spokesman told The Guardian the company believed the contaminated water posed no threat to health.
Meanwhile, Shell's new chairman, Phil Watts, who is facing pressure to find new growth opportunities for the company, told Reuters the quarter had proved to be excellent for new discoveries, but warned: "Looking forward, the rate of production growth is clearly going to be a challenge."
The company said on Thursday that second-quarter earnings from oil products hit a record of more than $1 billion – an increase of 44 percent on the period a year ago.
Downstream gas and power adjusted earnings of £390 million were also at record levels, rising 59 percent on the previous years second quarter.
But adjusted earnings from exploration and production, the company's biggest profit generator, showed only a marginal increase of 1 percent on a year ago, reaching $2.19 billion.
The Shell group is owned jointly by Netherlands-listed Royal Dutch Petroleum, with 60 percent, and Shell Transport & Trading, a UK-based company, which has the other 40 percent. 
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