BLBG:Shell Profit Falls More Than Expected As Oil Prices Drop
Royal Dutch Shell Plc (RDSA), Europe’s biggest oil company, reported a larger decline than expected in second-quarter earnings as crude prices dropped and maintenance work on fields held back production.
Profit fell 13 percent, excluding one-time items and inventory changes, to $5.7 billion, The Hague-based Shell said today in a statement. That missed the $6.3 billion average estimate of 10 analysts surveyed by Bloomberg. Benchmark brent crude futures slid 7 percent from a year earlier to average $108.76 a barrel on slowing global economic growth.
“I am concerned that the economy slows down” and “it’s a patchy picture at the moment,” Chief Executive Officer Peter Voser said in a Bloomberg Television interview. “But I take a much longer, longer view on the three-to-five year time horizon and I see demand coming back strongly.”
Shell Class A shares fell as much as 2.9 percent to 2,123 pence in London trading, the biggest intraday decline since May 8. They traded at 2,127 pence at 8:50 a.m. local time.
The explorer in April indicated that field maintenance would cut extraction by about 50,000 barrels of oil equivalent a day in the second quarter. It was also doing work at its Pearl gas-to-liquids plant in Qatar, while the start of the expanded Motiva refinery at Port Arthur in Texas resulted in a leak and fire taking off a crude unit until 2013.
Missed Forecast
Shell profit missed analyst estimates mostly because of “planned maintenance activities, which impacted production volumes,” Jean-Charles Lacoste, an analyst at Credit Agricole Cheuvreux SA, ssid in a report. At the same time “natural gas realisations in the Americas decreased by 52 percent.”
BG Group Plc, the U.K.’s third-largest natural-gas producer, today said profit declined by 77 percent mostly because of a charge on U.S. assets, where gas prices fell to the lowest in a decade this year. Norway’s Statoil ASA also said profit dropped. Exxon Mobil Corp., the world’s largest oil company, will report later today.
Net income dropped to $4.06 billion from $8.66 billion a year earlier. Shell produced 3.103 million barrels of oil equivalent a day in the quarter, up from 3.046 million a year ago. The company plans to raise volumes to about 4 million barrels a day as soon as 2017.
Net Gearing
The company’s net gearing dropped to 8.1 percent from 12.1 percent a year earlier.
Voser is examining plans to expand into East Africa, where explorers have made the largest natural-gas discoveries in a decade. Shell, which has indicated its interest in Mozambique gas fields, has started talks with Anadarko Petroleum Corp. after it dropped a bid for Cove Energy Plc, Anadarko’s partner in the African nation.
“East Africa is obviously a new gas province, which is coming up fast,” Voser said today. “We have exploration there in Tanzania, but we are watching the situation very carefully” and “this is a province, which is of interest.”
Shell said it had paid $500 million for Hess Corp.’s share in the U.K.’s Schiehallion field.
The Anglo-Dutch company plans to start exploration drilling off Alaska as soon as August after several years of delays. The company, which has invested about $4.5 billion in preparation, had a setback this month when a drilling ship slipped mooring and drifted toward shore, once again raising environmental concerns.
In February, Voser agreed to raise the dividend this year for the first time since 2009 on a forecast for a 50 percent increase in cash flow from operations through 2015 because of new projects.
Of the 27 analysts that cover Shell, 16 recommend buying the shares, 10 have hold ratings and one advises selling the stock.
To contact the reporter on this story: Eduard Gismatullin and Francine Lacqua in London at 2268 or egismatullin@bloomberg.net
To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net
