Shell Sets Earnings Records, Plans More Acquisitions

For the fifth quarter in a row, the Royal Dutch/Shell group announced record earnings 23% higher than those of a year earlier. Outgoing Chairman Mark Moody-Stuart said higher gas prices, better refining margins and increased liquefied natural gas volumes all contributed to the growth. Net income also set a record.

The group reported earnings of $3.9 billion, with net income standing at $3.89 billion. Exploration and production had record earnings of $2.85 billion, up 21% from the first quarter of 2000. On the backs of its takeover of New Zealand's Fletcher Challenge Energy Ltd., which contributed $1 billion, capital investments were up to $2.3 billion in the quarter, almost double from a year ago.

"We have come a long way over the last few years," said Moody-Stuart. "Throughout this period, we have continued to search for new opportunities for profitable growth, some of which you have seen come to fruition in the last few months. We will continue to seek out opportunities that fit into our portfolio and move on them if appropriate."

In a reference to several takeover bids, including its hostile move on Denver-based Barrett Resources (see related story), Moody-Stuart said that Shell would not "pursue targets purely in the interests of making a deal, nor will we lose sight of the underlying economics of our business." He added that "it is a `some you win, some you lose' world."

In a conference call with analysts Thursday, Shell's Finance Director Stephen Hodge was asked whether Shell was disciplined enough in its acquisition bids, which have been funded by oil earnings.

"Acquisitions come when they come," said Hodge. "It's sheer chance that we happen to have this run...The opportunity comes and you have to take it," but he said, "you don't give up the capital discipline."

Shell's "underlying business performance continues to exceed expectations," said Lehman Brothers analysts. However, because it has been "hit by the atrocious performance of its U.S. downstream," and a business mix that had "low exposure to U.S. gas and global oil production and high exposure to Asian downstream," the company needs to make acquisitions.

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