Shell Profits From LNG

Nov. 2.12 | About: Royal Dutch (RDS.A)

By Swagato Chakravorty

Royal Dutch Shell (NYSE:RDS.A) (LON: RDSA) received a bounty from liquefied natural gas (LNG) and its third-quarter profit showed it, rising 2.3 percent. In London trading, Shell shares rose to their highest since April.

Net income hit $7.14 billion, up from $6.98 billion in 2011, and profit was $6.6 billion, BusinessWeek reports. LNG sales rose by 4 percent to touch 4.97 million metric tons, due in large part to the company's Pluto project in Australia.

Already the world's largest supplier of LNG, Shell anticipates pumping more gas than crude this year. The company is devoting serious attention to developing LNG even further.

Various isolated field disturbances and weather-related slowdowns caused third-quarter production to decreased by 1 percent to reach 2.982 million barrels of oil equivalent per day. Gas pumping shot up by 4 percent, but liquids production, overall, dropped nearly 5 percent.

Shell's CEO expects to see almost 50 percent higher operational cash flow all the way through 2015 on newer projects.

In the U.S., Shell has reduced its shale-gas operations to favor oil projects likely due to the low price of natural gas. In a September deal with Chesapeake Energy (NYSE: CHK), the company paid $1.9 billion for liquids-concentric acreage in Texas.

In September Shell had 29 operational rigs for liquids operations in North America, quite a big change from 6 units as of 2011. Dry-gas rigs, though, decreased by half to 11, concentrated mostly on the Marcellus Shale and Western Canada.

Due to lowered demand, U.S. gas prices decreased around 29 percent in the third quarter compared with 2011. Shell’s plans envision $4 to $6 per million Btu, with $8 as an extreme upper limit.