Refining cushions Shell profits after oil price slide

By Ron Bousso and Dmitry Zhdannikov

LONDON (Reuters) - Refining and trading cushioned a drop in Royal Dutch Shell's first quarter profits, which fell less than expected after the collapse in oil prices decimated earnings from oil and gas output.

Shell joined rival oil majors BP and Total which this week reported stronger than expected profits thanks to refining, a division the firms have struggled to rationalise in recent years but which proved valuable in the recent oil price downturn.

By contrast Norwegian oil major Statoil , which owns little refining capacity, reported a surprise net loss in the first quarter.

"Our results reflect the strength of our integrated business activities, against a backdrop of lower oil prices," Shell Chief Executive Officer Ben van Beurden said.

Shell however lowered its 2015 planned capital investment to $33 billion from an earlier guidance of $35 billion.

At 0703 GMT, Shell shares were up 1.6 percent, outperforming the broader the European oil and gas sector.

Shell reported a 56 percent drop in first quarter net income at $3.2 billion, beating analysts' expectations of $2.4 billion profits.

It maintained a dividend of 47 cents per share and said it would use its planned $70 billion acquisition of smaller British rival BG Group to further optimise its asset base.

Shell's 6 percent investment cut was lower than its rivals in the sector which reduced 2015 upstream spending by 10 to 15 percent. Van Beurden in January warned against over reacting to the recent oil price fall.

"At last Shell is giving granularity for its 2015 capex guidance compared to its previous vague guidance. There is a relief that Shell is reacting to the lower prices," Raymond James analyst Bertrand Hodee said.

REFINING BOOST

Profits from refining and trading, also known as downstream, rose to $2.65 billion in the first quarter of 2015 from $1.575 billion a year earlier, offsetting a sharp drop in oil and gas production earnings to $675 million from $5.7 billion.

Benchmark Brent prices averaged $55 a barrel in the first quarter of 2015, almost half the level of a year ago.

Refining margins were higher in all regions from a year earlier, Shell said, as prices of products such as diesel and gasoline did not fall as sharply as crude oil prices due to stronger demand.

Shell's refineries at the same time processed 3 percent less than a year earlier.

Shell has sold $2 billion worth of assets so far this year as part of its drive to keep only its most profitable assets, it said.

(Reporting by Ron Bousso; Editing by Vincent Baby)