Royal Dutch Shell PLC and Italy's Eni SpA beat analyst forecasts with sharply higher third-quarter profits on Thursday, boosted by higher oil and gas prices and underpinning a strong sector trend.
Oil prices have been supported by recovery worldwide and particularly strong demand from Asia, especially in China whose booming economy became the world's largest energy user this year.
Shell, Europe's largest oil company by market value, said net income on a current cost of supply (CCS) basis rose 18 percent to $3.52 billion.
However its underlying result was up 88 percent on a year ago after stripping out one-off items and over $1 billion in non-cash charges, mainly related to write-downs in the value of refining assets.
Italian rival Eni reported a 47.5 percent rise in adjusted, or underlying, net profit.
Analysts, who usually ignore non-cash charges and one-offs and prefer to focus on underlying performance, said both companies' results were well ahead of forecasts.
Big oil companies were helped by a 12 percent rise in crude prices compared with the third quarter of 2009, while U.S. natural gas prices were 29 percent higher and British gas prices doubled. Average global refining margins also rose.
ConocoPhillips, the third-largest U.S. oil company, said on Wednesday its quarterly profit more than doubled, beating analysts’ predictions.
Industry leader Exxon Mobil is due to report third-quarter results later on Thursday and analysts have forecast a 53 percent rise in net income to $7.26 billion.
Shell's CCS earnings strip out unrealized gains or losses in the value of inventories related to changes in oil prices, and are comparable with net income under U.S. accounting rules.
Shell shares traded up 0.7 percent at 1103 GMT, against a 1.0 percent rise in the STOXX Europe 600 Oil and Gas index. Eni shares were up 2.7 percent.
OIL SPILL AFTERMATH
Shell also contributed to its rebound with cost cuts and a 5 percent rise in oil and gas production in the quarter to 3.1 million barrels of oil equivalent per day (boepd), just ahead of forecasts.
Shell's output has fallen sharply in recent years and strong gains in recent quarters suggest the company has turned the corner to growth, Peter Hitchens at Panmure said.
Eni said output rose 1.5 percent.
Both companies said output was hit by the U.S. deep water drilling moratorium, imposed because of the BP oil spill and ended earlier this month.
Shell's chief financial officer, Simon Henry, said the drill ban forced Shell to idle rigs in the Gulf of Mexico, at a cost of $115 million so far this year.
Canceled drilling plans and expected delays in receiving new drilling permits will likely reduce the Hague-based company's 2011 output by 40,000 barrels per day, Henry told a conference call with reporters.
Shell is one of the largest producers in the deepwater of the Gulf. BP, whose blown out Macondo well caused the U.S.'s worst ever oil spill this summer, is the largest, while Eni is a small investor.
Shell and Eni both benefited from a stronger-than-expected recovery in their refining units in the quarter compared to the same period last year but analysts are not sure it will last.
"Our outlook for refining, and European refining in particular, remains very cautious," analysts at Bernstein said in a research note.
Shell announced the sale of a Swedish refinery on Wednesday and plans further downstream sales.
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