Shell profit almost halves

Shell's floating oil production platform

LONDON, England (CNN) -- Royal Dutch/Shell Group, the world's second-largest oil company, said profit almost halved amid tough refining conditions and falling crude prices.

First-quarter net income, excluding costs, fell 48 percent to $1.993 billion from $3.855 billion a year ago. Analysts polled by Reuters had expected profits of between $1.4 and $2.1 billion.

Shell's results were the best among the world's top three oil companies. Exxon-Mobil (XOM), the biggest, said profit declined 58 percent last week, while BP's profit dropped 57 percent this week.

"Very strong results,'' Jon Wright, analyst at HSBC, told Reuters. "We're hoping this is the start of a bit of turnaround for Shell as people realise that profitability is strong and things aren't as bad as some feared.''

"It looks as though growth is coming through this year when people were expecting no growth for Shell,'' he said.

Shell Transport & Trading (SHEL), which owns 40 percent of Royal Dutch/Shell Group, rose 3.4 percent in midday London trading on Thursday, while Royal Dutch, which owns the remainder of Europe's biggest oil producer, climbed 0.6 percent in Amsterdam.

Its profit from oil refining and marketing business slid to $441 million from $958 million, while exploration and production profit dropped 49 percent to $1.455 million, the company said.

Brent crude oil prices averaged $21.15 a barrel in the first quarter compared to $25.80 a barrel a year ago, as demand declined due a to mild winter and a moderate economic recovery.

Weak demand put refining margins (the difference between the cost of crude and the selling price of by-products) under pressure in all markets, Shell said in a statement.

At its refinery in Rotterdam the company was making 5 cents on every barrel of crude it processed, compared to $2.20 a barrel a year ago.

Shell Chairman Phil Watts said the company was on track to deliver on its production growth target -- a key measure of an oil company's ability to boost profits -- of 3 a year.

"We have continued to deliver robust profitability, and we are on track to meet our targets."