Royal Dutch Shell PLC said Thursday its first-quarter profit rose 3.1 percent, boosted by the high price of oil, but the company said it may not meet earlier targets in restoring its proven oil reserves after its 2004 accounting scandal.
Net profit at the world’s third-largest oil company came to $6.89 billion, up from $6.68 billion in the same quarter a year earlier. Sales rose 5.3 percent to $76.0 billion from $72.2 billion.
Chief Executive Jeroen van der Veer called the results “satisfactory despite a series of operational challenges in the quarter.” These included slowdowns in production “in Nigeria due to civil disturbances and production deferred in the Gulf of Mexico as a result of the 2005 hurricanes.”
In a separate statement, he said the company might not be able to have a 100 percent replacement rate — which shows a balance between the amount of oil a company pumps and the amount it adds to proved reserves — before 2008.
“We still have a fair prospect of achieving that target,” Van der Veer said. “However, we do not want this target to drive the wrong business decisions, either in the timing of projects, or in the type of resources that we prioritize.”
Shell is recovering from a major accounting scandal in which it was forced repeatedly to reduce the size of its estimated oil reserves in 2004 and 2005, ultimately forcing the departure of then-Chief Executive Philip Watts. It also led the company to merge its British and Dutch arms into a single company to create a single management board.
In 2005, the company’s replacement rate was between 60 percent and 70 percent.
Shell is investing $19 billion in 2006, most of it in exploration and production, to help restore balance. The company has forecast it will add 750 million to 850 million barrels to proven reserves this year.
It said Thursday it would boost investment again, to $21 billion, in 2007.
“Our requirement for competitive returns means that we will probably hold back some of our longer-term projects, until the supply and contracting environment cools down. That in turn makes achieving our SEC proved reserves replacement forecast less likely than it was,” Van der Veer said.
He said the company would still try to meet its goals by developing “unconventional” oil resources “such as oil sands and gas-to-liquid” — converting gas to oil or other fluid petrochemicals — rather than by drilling traditional oil fields.
However, the company said that these may not qualify as “proved reserves” under accounting rules set by the U.S. Securities and Exchange Commission.
Shell shares rose 1 percent to 27.45 euros ($34.66) on heavy volume in Amsterdam trading.
KBC PeelHunt analyst Antoine Leurent said Shell’s results were “not bad,” with earnings slightly higher than analysts had forecast.
“Production was only 3 percent down,” he said. “I had expected a stronger impact from Nigeria.”
The first-quarter results were largely determined by the high price of oil. Brent crude sold for an average of $61.80 per barrel in the first quarter, versus $47.70 a year earlier.
In the company’s exploration and production unit, profit was up 27 percent to $3.74 billion, despite a drop in production volume, as Shell’s selling prices were 31 percent higher. Shell produced 3.8 million barrels of oil or oil equivalents per day, a 3 percent decline.
Shell lost 110,000 barrels per day of production in Nigeria, where armed militias have attacked pipelines and pumping stations. The militia took hostages in February who were later released, but are demanding a bigger cut of proceeds from oil production in the Niger Delta.
Shell lost 97,000 barrels per day of production in the Gulf of Mexico, where it is still repairing damage to pipelines and platforms caused by hurricanes Katrina and Rita.
Profit at the oil refining division fell 31 percent to $2.10 billion, partly because of lower margins and partly because last year’s results included $427 million in one-time gains, including the sale of a refinery in Bakersfield, Calif.