BLBG:Shell Profit Falls More Than Expected As Crude Oil Prices Drop
Royal Dutch Shell Plc (RDSA), Europe’s biggest oil company, reported a bigger 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. Brent crude futures, a benchmark oil price used by much of the world, fell 7 percent from a year earlier to average $108.76 a barrel.
“Our profits have fallen with energy prices, but our growth strategy is delivering to the bottom line,” Chief Executive Officer Peter Voser said in a statement today. “Our industry continues to see significant energy price volatility as a result of economic and political developments.”
Shell 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.
“Motiva expansion is very disappointing let alone its restart,” analysts at Deutsche Bank AG led by Lucas Herrmann wrote in a report before the earnings release. “The die was largely cast for the quarter before it had even begun. With downtime advised in the U.S. Gulf of Mexico and at Pearl, upstream progress was always likely to be relatively mute.”
Oil Production
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.
The company’s net gearing dropped to 8.1 percent from 12.1 percent a year earlier.
Norway’s Statoil ASA and the U.K.’s BG Group Plc also posted a drop in second-quarter earnings today. Exxon Mobil Corp., the world’s largest oil company, will report later today.
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.
Shell said it had paid $500 million for Hess Corp.’s share in the U.K.’s Schiehallion field.
Start Exploration
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 in London at egismatullin@bloomberg.net
To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net
