Royal Dutch Shell's third quarter 2008 earnings, on a current cost of supplies (CCS) basis, were $10.9 billion compared to $6.4 billion a year ago. Basic CCS earnings per share increased by 74% versus the same quarter a year ago.
Cash flow from operating activities for the third quarter 2008, excluding net working capital movements, was $10.4 billion. Net capital investment for the quarter was $11.2 billion. Total distribution to shareholders, in the form of dividends and share repurchases, was $3.1 billion and gearing was 15.4% at the end of the third quarter.
The sale of the BEB Erdgas und Erdoel GmbH (Shell share 50%) gas transport business in Germany was closed, increasing the third quarter 2008 earnings by some $1.4 billion.
A third quarter 2008 dividend has been announced of $0.40 per share, an increase of 11% over the US dollar dividend for the same period in 2007.
Royal Dutch Shell Chief Executive Jeroen van der Veer commented, "We delivered satisfactory earnings and operating performance in the third quarter of 2008. We are watching the world economic situation closely. Shell is robust across a wide range of energy prices. Our strategy remains to pay competitive and progressive dividends, and to make significant investments in the company for future profitability."
KEY FEATURES OF THE THIRD QUARTER 2008
SUMMARY OF IDENTIFIED ITEMS
Earnings in the third quarter 2008 reflected the following items, which in aggregate amounted to a net gain of $2,063 million (compared to a net gain of $265 million in the third quarter 2007), as summarised in the table below:
Third quarter Exploration & Production segment earnings were $5,501 million compared to $3,327 million a year ago. Earnings included a gain of $575 million related to identified items, compared to a net gain of $130 million in the third quarter 2007.
Earnings compared to the third quarter 2007 reflected the benefit of higher oil and gas prices on revenues, which was partly offset by lower production volumes, particularly in the USA as a consequence of hurricane impacts, higher exploration expenses and higher royalty expenses.
Global liquids realisations were 57% higher than in the third quarter 2007, compared with marker crudes Brent and WTI increases of 54% and 57% respectively. Global gas realisations were 48% higher than a year ago. Outside the USA, gas realisations increased by 45% whereas in the USA gas realisations increased by 66%.
Crude oil production was down 10% and natural gas production was down 2% compared to the third quarter 2007. Production, compared to the third quarter 2007, was impacted by some 120 thousand boe/d as a consequence of the hurricanes in the USA Gulf of Mexico and planned maintenance turnarounds in the UK North Sea related to the shutdown of the St. Fergus gas processing facilities.
Production compared to the third quarter 2007 included additional volumes principally from Ormen Lange (Shell share 17%) in Norway, Changbei (Shell share 50%) in China, West Salym (Shell share 50%) in Russia, F13W (Shell share 50%) and M3S (Shell share 70%) in Malaysia, Stybarrow (Shell share 17.1%) in Australia, Champion West Phase 3B/C (Shell share 50%) in Brunei, Starling (Shell share 28%), Caravel (Shell share 71%), Shamrock (Shell share 100%) and Curlew C (Shell share 100%) in the United Kingdom and Deimos (Shell share 71.5%) in the USA.
Third quarter portfolio developments
In Canada, Shell completed the acquisition of Duvernay, which is a Canadian tight gas company, for $5.5 billion. During 2008 Shell has also acquired significant additional acreage in the Montney gas play, in areas adjacent to Duvernay's positions, bringing Shell's total spend on tight gas acreage in the area to $6.2 billion in 2008. Shell estimates that this combined portfolio of approximately 2 thousand square kilometres contains discovered gas resources of some 1 billion boe, with significant additional exploration potential.
In Australia, Shell concluded the agreement with Arrow Energy Ltd. to jointly develop projects to extract clean-burning natural gas from coal deposits.
In the UK, Shell announced the start-up of the Curlew C field (Shell share 100%), the fourth North Sea field brought on stream during 2008. Together, these fields have an expected aggregate peak production capacity of some 30 thousand boe/d (Shell share).
In the Netherlands, Shell, through its joint venture Nederlandse Aardolie Maatschappij BV (Shell share 50%), signed Sales and Purchase Agreements for some euro 1.1 billion for the sale of assets situated along the NOGAT pipeline, covering exploration, production and transportation of oil and gas. The transaction is subject to regulatory approvals and third party consents.
In the USA Gulf of Mexico deepwater, Shell concluded the sale of its interest in the Big Foot prospect (Shell share 12.5%), for some $0.4 billion.
Also in the USA, a 30 thousand boe/d water injection project commenced at the Ursa/Princess field (Shell share 45%). The project is expected to continue for the next 30 years, extending the life of the field by some 10 years.
Third quarter Oil Sands segment earnings were $371 million compared to $183 million in the same quarter last year. Earnings included a gain of $25 million related to an identified item.
Earnings compared to the third quarter 2007 reflected the impact of higher oil prices on revenues, which was partly offset by lower production volumes, higher operating costs and higher royalty expenses.
Bitumen production decreased by 6% compared to the same quarter last year. Upgrader availability was 96% compared to 90% in the same quarter last year.
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