Shell's Q2 profit rises 40% as high oil prices offset production difficulties

AMSTERDAM (AP) - Royal Dutch Shell PLC (NYSE:RDS.A), Europe's second-largest oil company, said Thursday its second-quarter earnings jumped 40 per cent as high oil prices offset production difficulties in Nigeria and the Gulf of Mexico.

Net profit rose to $7.32 billion US, from $5.24 billion a year earlier. Sales rose less than one per cent to $83.1 billion, from $82.6 billion.

CEO Jeroen van der Veer said in a statement the earnings were "underpinned by overall good operational performance and not simply high energy prices."

Still, the main reason for the increase was higher oil prices, with earnings at Shell's oil exploration and production arm leaping to $4 billion from $2.75 billion, despite an eight per cent drop in production to 3.25 million barrels a day.

Prices for benchmark North Sea Brent crude averaged $69.51 US a barrel in the quarter, compared with $51.65 a barrel a year earlier.

Shell said it has added "at least" 48 billion barrels of oil to unproven reserves via acquisitions in Canada in the first half of 2006, at a combined cost of some $2.6 billion.

Subsidiary Shell Canada Ltd. (TSX:SHC) expects to grow its oilsands production by more than seven-fold to 50,000 barrels a day over the next two years as a result of its BlackRock Ventures acquisition earlier this month.

Royal Dutch Shell's results were in line with other major oil companies reporting results this week.

BP PLC said its second-quarter profits rose 30 per cent to $7.3 billion, while ConocoPhillips saw a 65 per cent increase to $5.18 billion. Exxon Mobil Corp., the world's largest publicly traded oil company, is due to report later Thursday.

Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said it was "good news" that Shell had beaten forecasts, in contrast to BP.

"But going forward, high oil prices will not continue to mask" if Shell's management makes mistakes, he said.

Excluding the damage caused by militant attacks on its operations in Nigeria and the fallout from hurricanes Katrina and Rita in the Gulf of Mexico, production would have been flat.