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HOUSTON -- Driven by higher energy prices, operational and production performance and the company's growth programs, Royal Dutch Shell reported yesterday that its first quarter 2010 results improved considerably compared with year-ago levels, and its profitability increased from the low levels seen in the fourth quarter of 2009.
First quarter 2010 earnings, on a current cost of supplies (CCS) basis, were $4.9 billion vs. $3.3 billion a year ago. Quarterly CCS earnings, excluding identified items, were $4.8 billion compared to $3.0 billion in the first quarter 2009, an increase of 60 percent.
Cash flow from operating activities for the first quarter 2010 was $4.8 billion. Excluding net working capital movements, cash flow from operating activities in the first quarter 2010 was $10.4 billion. Net capital investment for the quarter was $6.2 billion.
"We are making good progress in improving our near-term performance, delivering a new wave of production growth and maturing next generation project options," Royal Dutch Shell Chief Executive Office Peter Voser said in a statement.
The company's downstream asset sales are on track, with an exit from New Zealand completed and further disposals in hand. "We are making good progress with plans to reduce costs by $1 billion in 2010, and embedding the culture of continuous improvement, commerciality and cost control in our day-to-day activities," Voser said.
Looking to new longer-term opportunities, Voser said Shell has been busy so far this year, generating some interesting new positions. Shell's explorers have made three new exploration discoveries in the U.S. Gulf of Mexico, and entered into new tight and shale gas acreage in China. In Australia, Shell has agreed to purchase Arrow Energy Limited with its partner PetroChina. And in downstream, the company signed a non-binding memorandum of understanding to merge its Brazilian portfolio and selected next generation biofuels technologies with Cosan S.A., which Voser said would create a leading Brazilian downstream and biofuels company.
"There are mixed signals for the near-term outlook," he noted. "So far in 2010, oil prices have remained firm and demand for petrochemicals has increased, but refining margins, oil products demand and spot gas prices all remain under pressure. Although there are signs of an improving economic outlook, we are not relying on it. We are continuing with our focus on cash flow growth, underpinned by new project start-ups and lower costs."
Voser concluded: "I am pleased with the results in the first quarter 2010, which were largely driven by our own actions. The priorities are for a more competitive performance, for growth, and for sharper delivery of strategy. There is more to come from Shell."
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