* Exxon Q2 net rises 41 pct to $10.7 bln, lags forecasts
* Shell Q2 net up 77 pct to $8.0 bln, in line
* Statoil, Repsol dollar profits up, production down
* Shell's big new projects beginning to come on line
* Exxon output up on XTO buy
* Production costs rising
(Adds background, comment, oil services firms, updates shares)
By Tom Bergin
LONDON, Jul 28 Exxon Mobil , Royal Dutch
Shell Plc (RDSa.L) and other big oil groups reported higher
profits on Thursday thanks to high crude prices and showed the
only way to combat falling output was by reinvesting the cash in
acquisitions and new ventures.
Investors have become increasingly worried in recent years
about Western oil companies' inability to match natural field
decline with new finds, in part because they are shut out of
investing in the richest fields by countries such as Saudi
Arabia and Russia.
Exxon, whose net income jumped 41 percent to $10.68 billion,
said oil and gas production rose 10 percent in the quarter
compared to the same period in 2010 -- entirely thanks to its
purchase of XTO Corp for $30 billion last year.
On the other hand, Shell, which reported a 77 percent rise
in net profit to $8.00 billion, saw production fall because it
sold fields, while underlying output rose 2 percent.
While Exxon has bought growth via XTO, Shell is seeking to
boost output by investing tens of billions of dollars in complex
projects, mainly focussed on converting natural gas reserves
into liquefied natural gas or motor fuel.
"It's the end of low cost oil and gas. I think we are going
into a world where finding the oil and gas is going to be more
complex. It needs more money, needs more investment," said Shell
chief executive Peter Voser.
In the first half of the year, Shell started up three new
projects, a Canadian oil sands venture and two gas plants in
Qatar, in which it had invested $30 billion.
Tony Shepard, oil analyst at brokerage Charles Stanley, said
these projects had above-average production lives, and could
support a dividend increase next year.
Highlighting the challenge the industry faces in
bringing new barrels on line, Norwegian oil company Statoil and
Spain's Repsol said output fell.
Statoil's production fell 14 percent in the quarter to 1.69
million boepd, as it suffered from weak gas demand and delays to
drilling in the Gulf of Mexico due to the slow start in issuing
permits after the end of a drilling moratorium announced in the
wake of the BP oil spill.
Statoil also cut its output forecasts for the full year,
adding to investors' long-held fears about it being able to
realise its growth ambitions.
Repsol said production fell 13 percent to 296,000 boepd
following outages due to violence in Libya and delayed Gulf
drilling. However, the company has made big finds in Brazil
which could drive production higher in the medium term.
The companies also warned on rising costs. Statoil said its
per barrel production costs rose 15 percent. Shell did not give
a figure but the company's Chief Financial Officer, Simon Henry,
said industry inflation was returning after a period where oil
companies managed to squeeze suppliers.
SERVICES FIRMS BOOSTED
European oil services firms Technip and PGS
delivered sturdy earnings growth and upbeat guidance on
Thursday as the high oil prices stimulated energy companies'
spending on the hunt for new reserves.
The search for oil and gas riches in offshore Brazil and
Australia and the Gulf of Mexico fuelled profit growth at
Norwegian seismic explorer PGS and French contractor Technip.
Technip's recurring operating profit rose 9.4 percent to
175.6 million euros in the second quarter, while PGS posted a
quarterly operating income that was up eightfold to $49 million,
both beating analysts' forecasts.
Technip raised its full-year profit margin goal to 16.5-17
percent, from above 15 percent, in its subsea business, which
supplies underwater pipelines to the offshore industry. It also
nudged up its margin goal for onshore and offshore business,
which include oil rigs and refineries, to 6.5-7.0 percent.
"Looking forward, we see opportunities to expand in nearly
all our markets," Chairman Thierry Pilenko said. "A high and
fairly stable oil price combined with an increasing demand for
gas is driving upstream investments, while strategic and
regional imperatives are supporting downstream spending."
CEO Jon Erik Reinhardsen said PGS was "well on its way" to
achieving its target of full-year earnings before interest, tax,
depreciation and amortisation (EBITDA) of $500 million.
Shell's London-listed "A" shares were down 0.3 percent by
1408 GMT, broadly in line with the STOXX Europe 600 Oil and Gas
index . Shares in Statoil were up 0.6 percent while
Repsol, whose profits exceeded forecasts, were up 1.85 percent.
Technip shares rose 2.4 percent and PGS shares rose 0.5 percent.
Shares in Exxon fell 1.8 percent to $81.78 on the New York
(Additional reporting by Victoria Klesty in Oslo and Jonathan
Gleave in Madrid. Editing by Sophie Walker)