Shell Surges As Profits Gush

Oil giant Royal Dutch/Shell Group announced record annual profits of more than $8.5 billion on Thursday, sending its shares surging in both London and Amsterdam.

Earnings from oil and gas, boosted by higher oil prices and increased production, easily outweighed a substantial fall in profits from its chemicals business, the group said in its results statement.

Current cost net profit before special items rose to 5.2 billion from 4.52 billion, which was largely in line with analyst expectations. Net income on a historical cost basis rose by 30 per cent to a record 5.69 billion.

The group also announced share splits and changes in top management at both its Dutch and British units. A final dividend of 22.5 pence and an improved return on capital beat some analyst forecasts.

Shell, whose return on capital has traditionally lagged that of rival British Petroleum Co , reported a rise above 13 per cent, narrowing the gap with BPs 15 per cent return.

The net result is a good perception of the figures and I think the Americans will like them too this afternoon, said David Stedman, head of research at brokers Daiwa Europe. Shells shares jumped to new year-highs of 1,110 pence each, stabilising at 1,100 pence by 1145 GMT, a rise of 39.5 pence.

Shell said exploration and production earnings jumped by 1.4 billion in the year because of higher oil prices, increased production and sales of natural gas and lower costs.

But the company warned that crude oil prices, which have fallen back recently, could show some renewed weakness due to the resumption of exports from Iraq and continued expansion of non-OPEC production.

Earnings from oil refining and marketing also rose considerably, despite pressure on margins. But chemicals earnings were substantially down, and Shell said it expected chemical industry margins and profitability to remain weak throughout 1997.

The group is 60 per cent owned by Royal Dutch Petroleum and 40 per cent by Shell Transport and Trading Co. The British Shell arm said John Jennings would retire as chairman on June 30, to be replaced by Mark Moody-Stuart, while at Royal Dutch, Jeroen van der Veer has been appointed as a managing director.

Royal Dutch said it is to split its shares on a four-for-one basis, while Shell Transport is to issue two new shares for every one held.

In Amsterdam, Royal Dutch shares were up 11.90 guilders at 347.40.