Shell defies oil’s fall to boost profit as new chairman is announced

Shell reported soaring profits in the face of falling oil prices yesterday as it appointed Charles “Chad” Holliday as its new chairman.

Mr Holliday, already a Shell non-executive director and former chairman of Bank of America, will take over from Jorma Ollila, who has held the position for nine years, at the annual meeting next year. He left Bank of America earlier this month when its board voted to expand the responsibilities of the chief executive Brian Moynihan.

Shell reported a better than expected third-quarter profit of $5.8bn (£3.6bn) – a 31 per cent jump on the same period last year when its bottom line was hit by spiralling costs that have since been cut sharply.

The cost reductions helped Shell to increase profits at its “upstream” exploration and production unit by 25 per cent to £4.34bn, despite a 20 per cent slide in the oil price since the start of the summer. Meanwhile, profits doubled at its “downstream” operation to $1.79bn, as the falling cost of oil increased the margin on its refining business.

Although Shell’s third-quarter profits were much higher than the year before, they were down 4.1 per cent on the $6.1bn reported for the previous three months.

Furthermore, analysts warned, oil and gas prices have continued to decline sharply since the end of the quarter, threatening further revenue declines at Shell and its competitors.

These concerns sent Shell’s share price down by 6p to 2,307.5p.

Ben van Beurden, Shell’s chief executive, said: “The recent decline in oil prices is part of the volatility in our industry. It underlines the importance of our drive to get a tighter grip on performance management, keep a tight hold on costs and spending, and improve the balance between growth and returns.

“Our results show that we are delivering on the three priorities I set out at the start of 2014: better financial performance, enhanced capital efficiency and continued strong project delivery,”

Shell, which has been reducing investment and selling assets this year, said oil and gas production for the third quarter was 2.79 million barrels of oil equivalent a day, down 5 per cent year on year. But stripping out the impact of disposals, it said underlying production was up 2 per cent. It raised its dividend by 4 per cent to 47p a share.

In addition to working for Bank of America, Mr Holliday, who joined Shell’s board in 2010, was chief executive of the chemicals giant DuPont from 1998 to 2009. He remains a non-executive director of Bank of America.

Tony Shepard, an analyst at Charles Stanley, expects oil prices to remain depressed throughout next year, but he added: “Shell’s production profile has improved and should be more robust to the new operating environment.”

BP’s profit fell 19 per cent to $3bn this week as it suffered from the oil price decline and its Russian joint venture was hit by a tumbling rouble.