Royal Dutch Shell is to cut 1,000 more jobs, blaming the economic downturn for the 75 per cent drop in its profits in the fourth quarter.
The Anglo-Dutch oil major recorded a profit of $1.2bn (£761m) in the three months to December, way below the $4.8bn in the same period of 2008. Annual profits came in at $9.8bn – 69 per cent below last year's record of $31.4bn.
"Our fourth-quarter results were impacted by the weak global economy," said Peter Voser, the chief executive. "Oil prices have increased compared to a year ago, but gas prices and refining margins have declined sharply because of weaker demand and high industry inventory levels."
Shell's assessment of the future was equally downbeat. "We are not assuming there will be a quick recovery, and the outlook for 2010 is uncertain," Mr Voser added. "Our strategy is on track, although the near-term industry outlook does remain challenging.
"We are taking steps to improve our performance, to bridge the company, and our shareholders, into a period of significant growth in the coming years."
Shell's total production dropped by 2.4 per cent in the fourth quarter, to 3.33 million barrels of oil equivalent per day. But its "downstream" business, which includes refining and marketing, was particularly hard hit and recorded a loss of $1.76bn, compared with a $561m profit last year. Since his appointment in July, Mr Voser has cut 5,000 jobs across the company and sliced $2bn from its costs for 2009. He has also reorganised the business, taking out layers of management.
Shell is aiming for another $1bn of cost reductions in the coming year. Most cuts will come from corporate functions or the downstream business. Shell sold $1.3bn of non-core downstream assets in 2009, taking the total to $11bn since 2005. Fifteen per cent of its refinery capacity –about 560,000 barrels per day – is under review.
"Downstream is facing some tough times," Mr Voser said. "There is a significant overhang of industry refining capacity, exacerbated by the downturn."
The City reacted sharply to Shell's disappointing results and its shares closed down 2.54 per cent at 1666p.
"This was truly awful set of figures but, with no incentive to impress the market after poor results from industry peers, it was only to be expected," said Malcolm Graham-Wood, of Westhouse Securities. "Shell is starting from a long way behind BP and others in the cost-cutting game. With massive restructuring only just under way in the downstream business, the short-term outlook is particularly bleak."
Earlier this week, BP blamed refining margins for its lowest profit since 2003. It made $14.4bn in 2009, 45 per less than the year before.Reuse content