Shell Q1 profit falls on oil price, beats forecasts

The Shell logo is seen at the Kingsbury fuel terminal, central England June 13, 2008.

LONDON (Reuters) - Royal Dutch Shell Plc (RDSa.L) followed an oil industry trend of sharply lower first-quarter profit on Wednesday, due a halving of crude prices, but beat analysts' forecasts as its trading activity flourished.

Shell said its current cost of supply (CCS) net income, which strips out unrealized profits or losses related to changes in the value of inventories, fell 58 percent compared to the same period in 2008, to $3.30 billion.

The result compares with a drop of 62 percent at rival BP Plc (BP.L) and an 80 percent drop at U.S. oil major ConocoPhillips (COP.N).

Shell's London-listed "A" shares rose 0.65 percent to 1,548 pence at 0819 GMT, compared to a flat DJ Stoxx European oil and gas sector index .SXEP.

The results were "strong on face value" Citigroup oil analyst Mark Bloomfield said, adding that the figures were likely flattered by strong oil trading results which may not be repeated.

Europe's largest oil company by market value said production of oil and gas fell 3.6 percent to average 3.40 million barrels of oil equivalent per day in the quarter, as new field startups failed to match natural field declines.

Brent crude averaged around $44 per barrel in the quarter compared to $97 a year ago, hitting earnings at the core upstream oil and gas production unit.

Most other areas of the Hague-based company's business also suffered, with big profit drops in oil refining and fuel retailing and a swing to loss in petrochemicals.

The sharpest reversal in percentage terms was in Shell's oil sands unit, which squeezes crude from bitumen-drenched soil in Alberta, a high-cost activity hit hard by lower oil prices.

This unit swung to a $42 million loss from a profit of $249 million in the first quarter of 2008.

However, echoing the performance of BP and ConocoPhillips, Shell said profit from trading oil and gas rose.

Shell said debt levels rose, as cashflow from operations were not sufficient to cover expenses and dividend payments. Gearing tripled to 6.6 percent but remains low enough not to prompt fears the company may have to cut its dividend.

Excluding one-off gains of $337 million, Shell's CCS result was $2.96 billion, beating an average forecast of $2.62 billion from a Reuters poll of seven analysts.

(Editing by Dan Lalor, John Stonestreet)