Royal Dutch Shell issues shock profit warning

 

Shell dropped a bombshell on investors after warning that fourth quarter profit will be "significantly" lower than last year, blaming low production, high exploration costs and continuing problems with refining.

Declaring that  this "was not what I expect from Shell", the company’s new boss, Ben van Beurden, forecast that profits for the final quarter would come in at just $2.2 billion (£1.3 billion), less than a third of its $7.3 billion surplus a year earlier. Analysts had been expecting profits of around $4 billion.

Profits for 2013 as a whole are now forecast to fall by about 38 per cent to $16.8 billion, Europe’s largest oil company said. Shell's shares fell by 72p, or about 3 per cent, to 2234p, wiping some £6.5 billion off its market value.

Van Beurden, who took the reins from Peter Voser just two weeks ago, said: “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.”

He blamed the low production volumes on the high level of maintenance required over the period and continuing security problems in Nigeria, while the downstream division suffered from increased competition from new super-refineries in Asia. Shell said it would take a $700 million charge related to its exploration and production activities.

“It’s not good. When you’re talking about higher costs and lower production volumes, it’s a lethal combination,” said Nick Xanders, who heads European equity strategy at BTIG, the trading and brokerage firm. “It’s symptomatic of the entire market, with costs rising but revenues not coming through. Some hope that it’s a company thing, but I don’t think it is.”

Shell said it was continuing to make a loss in the US, where the shale gas boom has dragged down prices. Falling oil and gas prices and the weakening Australian dollar also played a part in the profit decline, the company said.

Shell’s announcement continues a string of disappointments over the past year. Earlier this week, it revealed plans to sell off some of its North Sea oilfield investments, and last year it began selling off interests in the US shale gas industry. Also, last month, it cancelled a $20 billion project to build a gas processing plant in Louisiana.

Shell will announce full-year results on January 30. It said it expects its upstream production division to have made a $2.5 billion profit in the fourth quarter, down from $4.4 billion a year earlier. Profit at its downstream unit is expected to have fallen from $1.2 billion to $0.5 billion.

Start your day with The Independent, sign up for daily news emails
Life and Style
Steve Shaw shows Kate how to get wet behind the ears and how to align her neck
healthSteven Shaw - the 'Buddha of Breaststroke' - applies Alexander Technique to the watery sport
News
A poster by Durham Constabulary
news
Sport
Cameron Jerome
footballCanaries beat Boro to gain promotion to the Premier League
Arts and Entertainment
Performers drink tea at the Glastonbury festival in 2010
music
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Abuse - and the hell that came afterwards

Abuse - and the hell that follows

James Rhodes on the extraordinary legal battle to publish his memoir
Why we need a 'tranquility map' of England, according to campaigners

It's oh so quiet!

The case for a 'tranquility map' of England
'Timeless fashion': It may be a paradox, but the industry loves it

'Timeless fashion'

It may be a paradox, but the industry loves it
If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

Could have done with Osama bin Laden staying alive?

Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
New exhibition celebrates the evolution of swimwear

Evolution of swimwear

From bathing dresses in the twenties to modern bikinis
Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine