Shell outshines rival BP as it un veils 20% rise in Q2 profits

Shell said that the rise in its current cost of supply (CCS) profit, which excludes changes in the value of inventories, was helped by a non-operating gain of $660 million. Stripping this out, underlying profits at the oil giant rose 5 per cent to $6.89bn.

Jeroen van der Veer, the group chief executive, said he was pleased with the performance of both the group's exploration and refining arms, which were operating "in an industry landscape of both high energy prices and higher costs".

The company said production of oil and gas fell 2 per cent to 3.18 million barrels of oil equivalent per day (boepd), partly due to security problems shutting down Nigerian fields.

Another factor in the production fall was the warm winter in north-west Europe, which curbed demand for gas from the North Sea. Shell's buoyant performance compared favourably with recent falls in Q2 earnings at the likes of BP, ENI of Italy and Spain's Repsol.

BP said earlier this week that profits fell slightly because plant stoppages had prevented it from taking advantage of improved profitability in refining.

Shell's profits performance was driven by a bumper performance in the refining division, where earnings leapt 40 per cent in Q2 to $2.94bn. Broker Cazenove described the oil products result as "very strong". However, exploration and production profits dropped to $3.3bn against $3.9bn in the second trading quarter of 2006, hit by lower volumes, tax charges and higher costs.

Gas and power profits rose to $779m ($513m). It was the eighth quarter running that Shell has beaten analysts' forecasts, suggesting it has turned the corner after difficult years when it admitted overstating reserves and was then pressured into ditching its complex dual-listing structure.

"We will be moving our forecasts higher to reflect the strong headline earnings," Peter Hitchens at Teather & Greenwood said.

Shell declined to offer any guidance on a restart of the Nigerian operations and van der Veer said that output for the year would be at the lower end of the company's 3.3-3.5 million boepd target range.

While high oil prices underpinned the results, they were in line with levels achieved in the same period last year.