Higher oil price drives 90% profit rise at Shell

Oil giant Royal Dutch Shell said profits in the third quarter leapt nearly 90% to beat even the most optimistic forecasts thanks to higher oil prices and better refining margins.

The Anglo Dutch oil company reported a clean underlying profit of $4.9 billion, an 88.5% rise from the same period a year earlier and 14% above the consensus forecast of $4.4 billion.

That was helped by a 15% increase in oil prices and a 17% rise in gas prices. And while many peers have seen production levels stall this year, Royal Dutch Shell said oil and gas production had risen 5% - also beating analyst expectations.

The group said sales of liquefied natural gas volumes soared 22%.

Chief executive officer Peter Voser said: 'We are seeing new growth, with improved earnings and cash flow. He said the group is 'making good progress against our targets, and there is more to come from Shell'.

The group said it will pay a dividend of 42 cents - in line with levels paid in previous quarters - with sterling and euro equivalent dividend payments to be announced on December 3.

The group said gearing - a measure of its debt - had climbed to 19% from 13.7% a year earlier showing as expected that the group has increased its borrowing to fund payouts to shareholders as the payout is still larger than the cash flow the group generates.

Fred Lucas at JPM Morgan Cazenove points out this is an even better performance from Shell than the market has come to expect, given the group has beaten market expectations by an average of 5.7% over the last 43 quarters.

And he said it is likely there will be a move upwards in consensus forecast for the full year given Shell has already produced earnings per share of 148p for the first nine months of the year - equivalent to 77% of the full year consensus of 193p.

But the share performance was muted with shares up just 8.5p at £19.61 and underperforming the wider market.

At that level the shares are trading less than 1% below the year high of £19.75 and Lucas pointed out Shell has generated a total shareholder return of 13% versus 9% from the FTSE All Share, 1% from US peer Exxon Mobil and a fall of 29% from beleaguered BP.

Nonetheless he still has an 'outperform' view on the shares.