LONDON (Dow Jones) -- Royal Dutch Shell said second-quarter profit climbed 33% as surging oil prices helped offset diminished production as the group struggles to pump oil out of Nigeria.

Joining Exxon Mobil as the only oil company to earn more than $10 billion in a single quarter, Royal Dutch Shell said its profit rose to $11.56 billion.

The profit rise wasn't hard to ascertain -- Shell was able to sell the oil and natural gas it produces for 76% more than it did in the same period last year.

The quarter included a net $73 million of one-time items, as divestments were offset by mark-to-market valuations on U.K. gas contracts and tax charges.

Excluding price changes on unsold inventories and other one-time items, Shell would have earned $7.9 billion, up 5% from the same period last year.

This came in short of analyst estimates by some $500 million, but because the miss was down to valuations of derivatives that Shell isn't likely to sell, analysts took the profit miss in stride. However, Shell increased by $2 billion their estimate of annual capital spending, estimating between $35 billion and $ 36 billion will be spent.

"This is partly a function of inflation, but also reflects an ongoing increase in activity levels at Shell," said James Neale, a Citigroup analyst.

Shell's shares slipped 0.7% in afternoon action in London.

Hurt by violence in Nigeria that has shut onshore production, Shell's production fell 1% to 3.05 million barrels of oil a day.

Shell earlier this week declared force majeure on exports from Nigeria for the next two months, meaning it won't be able to deliver them, after attacks on two pipelines.

The company generated $351 million in profits from oil sands projects, an expensive and critics say environmentally damaging way of producing oil. That's a 74% rise from the same period as last year even though production fell 21%.

As with BP earlier this week, Shell also reported falling margins from refining and from its gas stations. In those divisions, oil prices hurt rather than help profits.

  (END) Dow Jones Newswires
  07-31-08 0945ET
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