Royal Dutch Shell Plc said second-quarter profits doubled thanks to high oil prices and bigger than expected restructuring gains and unveiled a plan to boost asset sales, echoing a plan from rival BP .
Both Shell and its bigger U.S. rival Exxon Mobil Corp beat analysts forecasts with their results on Thursday. Click here for a story on Exxon's profits, which rose 85 percent.
Shell, Europe's largest oil company by market value, said it aimed to sell $7-8 billion of assets over 2010 and 2011, up from an annual target of around $2 billion in disposals.
Like BP, which is downsizing partly to raise cash to pay for its Gulf of Mexico oil spill, Shell's asset sales will mainly be in the upstream, with the aim that a better holding of fields will drive stronger growth.
This is a continuation of our strategy of high-grading our portfolio, Chief Executive Peter Voser said on a conference call with reporters.
Chief Financial Office Simon Henry said two-thirds of planned sales would be upstream assets but that Shell still expects to meet its output target of 3.5 million barrels of oil equivalent per day (boepd) in 2012, up from 3.2 million in 2009.
Henry denied Shell was copying the slim-down strategy announced on Tuesday by BP, which expects output to fall from 4 million to 3.5 million boepd after its divestment programme.
We may not be the only company targeting 3.5 million barrels (per day) but we are traveling in the right direction, he said on the call.
Shell's London-listed B shares traded up 0.2 percent at 0751 GMT against a 0.3 percent drop in the STOXX Europe 600 Oil and Gas index <.SXEP>.
After a 7 year decline in production, Shell said output rose 5 percent in the second quarter, compared to the same period in 2009, averaging 3.11 million boepd. It was the second consecutive quarter of strong growth.
The production turnaround is now well under way and should only strengthen as the big projects come on stream in the next six months, analysts at Petercam said in a research note.
However, the portfolio is becoming increasingly focused on gas, which traditionally has offered weaker returns than crude.
Oil represented around 53 percent of total production in the quarter, against 59 percent in the same period last year. The shift was driven partly by a 34 percent jump in volumes of liquefied natural gas.
Netherlands-based Shell said current cost of supply (CCS) net income was $4.53 billion in the quarter, a rise of 94 percent compared to the same period in 2009, when the company had some big non-cash charges.
Excluding such non-operating items, the result grew 34 percent to $4.21 billion, beating an average forecast of $3.99 billion from a Reuters poll of 10 analysts.
London-based BP's underlying result rose 77 percent while ConocoPhillips, the third-largest oil company in the U.S., said underlying profit rose 150 percent.
The results included a $56 million charge related to the U.S. moratorium on deepwater drilling awarded after the BP oil spill.
Shell said it had exceeded restructuring targets, achieving annual cost savings of $3.5 billion and cutting 7,000 jobs, allowing it to wrap up its overhaul six months quicker than planned.
Shell has turned the corner in cash consumption and is beginning to generate substantial free cash flow, said Mark Fletcher, oil analyst at Citigroup.
CCS net income strips out non-cash gains or losses related to changes in the value of fuel inventories, and, as such, is comparable to net income under U.S. accounting rules.
Profits were boosted by a benign operating environment.
The price Shell received for its oil rose 41 percent in the quarter, compared with the second quarter of 2009, while gas prices were 15 percent.
Refining margins and retail fuel sales also rose.
Shell gave a cautious outlook on the global economic environment and for fuel demand.
We continue to see mixed signals in the global economy. Oil prices have remained firm so far this year, but refining margins, oil products demand and natural gas spot prices all remain under pressure ... the outlook remains uncertain, Chief Executive Peter Voser said in a statement.
(Editing by Will Waterman and Andrew Callus)