Shell dashes share buyback hopes

HIGH oil and gas prices have led to further bumper profits at Shell, with adjusted second-quarter earnings up 51% at $3.3bn (£2.05bn), topping City forecasts.

The oil giant benefited from continued uncertainty over world crude supplies despite the end of the Iraq war. It also gained from an improved performance in its US retail and refining arm and cost savings after last year's acquisitions spree.

However, Shell has decided not to restart its share buyback programme. Shareholders will instead pick up an interim dividend increased by 2.5% to 5.95p.

Analysts had expected the Anglo- Dutch group to renew its buyback programme in the second half.

But Sir Philip WattsWatts said ' attractive investment opportunities' would take priority. Oil supermajors such as Shell are desperately looking for new fields to explore oil reserves in traditional hot spots such as the North Sea dry up. Watts said Iraq remained firmly on the group's wish list.

Shell is the largest private oil company in the Middle East and has already teamed up with Exxon and Conoco Philips in a bid to become the first foreign consortium to win production rights in Kuwait.

Watts said: 'We maintain a strong interest in doing more business in the Middle East. Our position on Iraq has not changed. We are interested but we won't go in until there is a legitimate authority with whom we can do business.'

Shell hit record profits of $3.9bn in the first-quarter as concern about the Iraq conflict pushed oil prices skyhigh. Brent crude averaged $26.05 a barrel in the three months to 30 June.

Shell said oil prices for the second half of 2003 would depend on Opec's response to the return of Iraqi exports to the market and on the state of the global economy. It also stuck to its production target.

Today's figures came despite a 2% slip in oil production across Shell's global empire to 2.36m barrels a day after political unrest in Nigeria affected the group's upstream interests in the Niger Delta. Bruce Evers of Investec said: 'The news on the buyback may be disappointing but these numbers are very, very good.'