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Energy giant Shell issues shock profits warning

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Shell issued a severe profits warning on Friday blaming exploration costs, pressures across the oil industry and disruption to Nigerian output, sparking a sharp drop in its share price.

The London-listed energy group said in a surprise trading update that fourth-quarter profits were set to be "significantly lower than recent levels of profitability".

Profit on a current cost of supplies (CCS) basis or current-cost accounting -- which strips out changes to the value of oil and gas inventories -- was set to plunge 70 percent to about $2.2 billion (1.6 billion euros) in the three months to December.

That would mark a fall from $7.3 billion in the same period of 2012.

Over the whole of 2013, CCS profit was expected to dive 38 percent to $16.8 billion.

The grim figures caused Shell's share price to fall heavily in early morning deals in London, before later clawing back some ground.

Motorists refuel their cars at a Shell petrol station in Fleet  Hampshire in southern England on Jul...
Motorists refuel their cars at a Shell petrol station in Fleet, Hampshire in southern England on July 29, 2010
Adrian Dennis, AFP/File

"Shell's fourth quarter 2013 earnings ... were impacted by weak industry conditions in downstream oil products, higher exploration expenses and lower upstream volumes," the company said.

Excluding one-off items, CCS profit sank to $2.9 billion in the fourth quarter, down from $5.6 billion in the same part of 2012.

"Our 2013 performance was not what I expect from Shell," said chief executive Ben van Beurden in the gloomy update, published just two weeks after he took the helm at the Anglo-Dutch major.

"Our focus will be on improving Shell's financial results, achieving better capital efficiency and on continuing to strengthen our operational performance and project delivery."

Net profit was set to plunge by 73 percent to $1.8 billion in the fourth quarter of 2013, compared with the outcome a year earlier, Shell added.

Annual net profit was expected to slide 38.5 percent to $16.4 billion in 2013, from $26.7 billion in 2012.

Royal Dutch Shell warned its fourth-quarter profits were expected to be
Royal Dutch Shell warned its fourth-quarter profits were expected to be "significantly lower than recent levels", blaming higher exploration costs, lower volumes and the poor industry environment
Paul Ellis, AFP/File

Friday's dire earnings update was published ahead of Shell's official annual results statement, which is scheduled for publication on January 30.

In late morning deals, Shell's 'A' share price slid 2.25 percent to 2,145.52 pence on London's FTSE 100 index of top companies shares, which rose 0.36 percent to 6,839.49 points.

Friday's warning marks a downbeat start to Van Beurden's tenure as chief executive. The Dutch national took over from Peter Voser on January 1.

"Shell has fallen far less than expected this morning, despite its profit warning," said Rebecca O'Keeffe, head of investment at online stockbroker Interactive Investor.

"The company appears to have lost its way somewhat and is invested in areas of the market that are not doing well.

"However, with a new CEO who can hopefully make fundamental changes to their investment strategy and with the current oil market very stable, Shell can turn things around.

"In addition, the major shortage of reliable income stocks in the UK mean it is still an attractive proposition for many investors."

Shell had revealed in May that Voser would retire in 2014 to spend more time with his family. He had been chief executive since July 2009.

Shell issued a severe profits warning on Friday blaming exploration costs, pressures across the oil industry and disruption to Nigerian output, sparking a sharp drop in its share price.

The London-listed energy group said in a surprise trading update that fourth-quarter profits were set to be “significantly lower than recent levels of profitability”.

Profit on a current cost of supplies (CCS) basis or current-cost accounting — which strips out changes to the value of oil and gas inventories — was set to plunge 70 percent to about $2.2 billion (1.6 billion euros) in the three months to December.

That would mark a fall from $7.3 billion in the same period of 2012.

Over the whole of 2013, CCS profit was expected to dive 38 percent to $16.8 billion.

The grim figures caused Shell’s share price to fall heavily in early morning deals in London, before later clawing back some ground.

Motorists refuel their cars at a Shell petrol station in Fleet  Hampshire in southern England on Jul...

Motorists refuel their cars at a Shell petrol station in Fleet, Hampshire in southern England on July 29, 2010
Adrian Dennis, AFP/File

“Shell’s fourth quarter 2013 earnings … were impacted by weak industry conditions in downstream oil products, higher exploration expenses and lower upstream volumes,” the company said.

Excluding one-off items, CCS profit sank to $2.9 billion in the fourth quarter, down from $5.6 billion in the same part of 2012.

“Our 2013 performance was not what I expect from Shell,” said chief executive Ben van Beurden in the gloomy update, published just two weeks after he took the helm at the Anglo-Dutch major.

“Our focus will be on improving Shell’s financial results, achieving better capital efficiency and on continuing to strengthen our operational performance and project delivery.”

Net profit was set to plunge by 73 percent to $1.8 billion in the fourth quarter of 2013, compared with the outcome a year earlier, Shell added.

Annual net profit was expected to slide 38.5 percent to $16.4 billion in 2013, from $26.7 billion in 2012.

Royal Dutch Shell warned its fourth-quarter profits were expected to be

Royal Dutch Shell warned its fourth-quarter profits were expected to be “significantly lower than recent levels”, blaming higher exploration costs, lower volumes and the poor industry environment
Paul Ellis, AFP/File

Friday’s dire earnings update was published ahead of Shell’s official annual results statement, which is scheduled for publication on January 30.

In late morning deals, Shell’s ‘A’ share price slid 2.25 percent to 2,145.52 pence on London’s FTSE 100 index of top companies shares, which rose 0.36 percent to 6,839.49 points.

Friday’s warning marks a downbeat start to Van Beurden’s tenure as chief executive. The Dutch national took over from Peter Voser on January 1.

“Shell has fallen far less than expected this morning, despite its profit warning,” said Rebecca O’Keeffe, head of investment at online stockbroker Interactive Investor.

“The company appears to have lost its way somewhat and is invested in areas of the market that are not doing well.

“However, with a new CEO who can hopefully make fundamental changes to their investment strategy and with the current oil market very stable, Shell can turn things around.

“In addition, the major shortage of reliable income stocks in the UK mean it is still an attractive proposition for many investors.”

Shell had revealed in May that Voser would retire in 2014 to spend more time with his family. He had been chief executive since July 2009.

AFP
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With 2,400 staff representing 100 different nationalities, AFP covers the world as a leading global news agency. AFP provides fast, comprehensive and verified coverage of the issues affecting our daily lives.

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