Royal Dutch Shell Posts Rise in Profit

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Royal Dutch Shell PLC on Thursday reported a rise in third-quarter earnings, with increases in both upstream and downstream, despite falling oil prices.

The Anglo-Dutch energy giant also named Charles O. Holliday as its new chairman, replacing Jorma Ollila, who has held the position for nine years. Mr. Holliday, a former chief executive of DuPont Co. , will take over the role next year.

Shell’s current cost-of-supplies profit—a measure similar to the net profit reported by U.S. oil companies—rose to $5.27 billion, from $4.25 billion a year earlier. Underlying replacement cost, which excludes identified items, was $5.85 billion, compared with $4.46 billion a year earlier. A poll of 10 analysts conducted by The Wall Street Journal forecast underlying replacement cost profit of $5.69 billion.

The oil major has increased its quarterly dividend to 47 cents a share, from 45 cents.

Chief Executive Ben van Beurden, said: “With $8.9 billion of dividends declared and $2.4 billion of shares repurchased in the first three quarters of this year, we are on track for a program of over $30 billion of dividend distributions and buybacks for 2014 and 2015 combined.”

“All of this underlines the company’s recent improved performance and potential for the future,” Mr. van Beurden added.

Revenue in the quarter fell to $107.85 billion, from $116.51 billion a year ago.

Jason Kenney, an analyst with Banco Santander , said Shell’s exploration-and-production division benefited from new projects coming online in the Gulf of Mexico—an area with high profit margins.

The company’s processing, or downstream, division increased adjusted current cost of supplies profit to $1.79 billion, from $892 million. Operations such as refining and petrochemicals are often boosted by weaker oil prices because the cost of the raw materials needed is lower.

Shell has been working to cut spending and improve profit margins since Mr. van Beurden took over as chief executive in January. He promised to re-evaluate the company’s businesses and take a closer look at where costs can be reduced in the processing and exploration-and-production divisions.

In its exploration-and-production division, known as upstream, Shell’s adjusted current cost of supplies profit, was $4.34 billion compared with $3.47 billion a year earlier. The increase was mainly because of new, higher-margin production, lower exploration expenses, and higher earnings from integrated gas, despite the effect of lower oil prices and volumes overall. However, the increase of a deferred tax liability as a result of the weakening Australian dollar reduced earnings by some $400 million compared with the third quarter 2013.

Mr. van Beurden said the earnings show that the company is delivering on the priorities he set out at the start of 2014—better financial performance, enhanced capital efficiency and continued strong project delivery.

“We have moderated our spending on growth and accelerated disposals of our nonstrategic portfolio as part of a drive to improve capital efficiency. Proceeds from asset sales so far this year total $11.6 billion, with further disposals ongoing,” he added.- reported http://online.wsj.com.

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