Shell vows to return to the Arctic as profits slide by 31 per cent
Oil giant blames weak margins in refining and disruptions and theft in Nigeria for the slump
Shell has pledged to return to the Arctic as soon as possible after revealing a further $200m (£125m) hit from the grounding of its Kulluk oil rig off the Alaskan coast on New Year's Eve.
The company has already spent more than $5bn (£3bn) on Arctic exploration, including costs relating to the Kulluk incident, but has yet to locate any oil-bearing rocks.
However, the FTSE 100 group's chief financial officer, Simon Henry, insisted Shell remained committed to producing oil in the Arctic. "It remains the most attractive single opportunity for the future … by far the biggest prize," he said, adding that Shell hoped to resume exploratory drilling there next year if it can secure permits and authorisations in time.
Mr Henry was speaking after Shell reported a 31 per cent slide in third-quarter profits to $4.25bn on the back of weak margins at its "downstream" refining business, as well as production disruptions in Nigeria, which knocked about $300m off its bottom line. The company's shares fell by 117.5p to 2,159p.
Business in Nigeria was hit by widespread oil theft in the Niger Delta region and a blockade of its liquefied natural gas plant – Nigeria LNG – after the country's Maritime Security Agency blocked ships from leaving the terminal in July because of a dispute over unpaid levies.
The chief executive Peter Voser, announcing his final results before retiring at the end of the year, said: "We are facing headwinds from weak industry refining margins and the security situation in Nigeria, which continue to erode the near-term outlook."
Refining margins have been hit across the industry, amid rising competition from super-refineries in Asia and the Middle East and weak demand for petrol and diesel in the West.
Shell said its downstream profits for the period fell 49 per cent to $892m, two days after BP reported a 30 per cent drop in its third-quarter profits.
Meanwhile Exxon, the largest oil company in the world, also blamed refining for poor third-quarter results yesterday. The US giant reported an 81 per cent drop in downstream profits to $592m, dragging down the group's profits by 18 per cent to $7.87bn.
Shell's activities in the Arctic, which are controversial with campaigners concerned about the impact of any oil spills on the environment there, have been suspended since the Kulluk ran aground while being towed to a Seattle shipyard for routine maintenance. The latest $200m charge is an estimate and the precise number will be contained in Shell's fourth-quarter results, which will be announced early next year. It relates to the fact that the Kulluk is unlikely to be brought back into operation.
The company said its focus in the Arctic would shift from the Beaufort Sea, where it carried out its previous exploration, to the neighbouring Chukchi Sea. Shell would not rule out returning to the Beaufort Sea in the future, but said the water there was too shallow to operate in at the moment without the Kulluk or a similar-sized rig.
Mr Henry said Shell has secured a replacement rig, suitable for use in the deeper Chukchi Sea, where he believes oil reserves are more plentiful.
"We have not confirmed yet if we drill in 2014 but we do expect to file an exploration plan shortly. Clearly we would like to drill as soon as possible," he added.
Mr Voser said Shell was "rich with investment opportunities" and would have to make some "hard choices" in the next few quarters to make sure it picked the right projects.
He assured shareholders that dividends were still a key priority, and said:"We have distributed more than $11bn of dividends in the last 12 months." Shell's third-quarter dividend is 45 cents a share, a 5 per cent rise from a year earlier but the same as the previous quarter.
- 2 Question Time's 'passionate highlander' is the William Wallace of the Better Together campaign
- 3 PornHub begs users to stop uploading video clips of Brazil getting beaten 7-1
- 5 The true Gaza back-story that the Israelis aren’t telling this week
Instagram of US airport security chiefs: Lipstick knives and IED training kits among items seized
Game of Thrones author George RR Martin says 'f*** you' to fans who fear he will die before finishing Westeros saga
Question Time's 'passionate highlander' is the William Wallace of the Better Together campaign
Israel-Gaza crisis: Eight killed in Gaza Strip cafe while watching World Cup semi-final
Supermoon 2014: When and why will the moon look bigger and brighter this summer?
Sustained immigration has not harmed Britons' employment, say government advisers
Australia facing international condemnation after turning around Sri Lankans at sea
7/7 memorial defaced on anniversary of 2005 attacks with ‘Blair lied thousands died’ graffiti
Even when it brutalises one of its own teenage citizens, America is helpless against Israel
Socialist Worker called to apologise over ‘vile’ article saying Eton schoolboy Horatio Chapple's death is ‘reason to save the polar bears’
There’s a nasty smell in the political air – and it’s coming from the Tories
iJobs Money & Business
£50000 - £70000 per annum: Harrington Starr: Business Analyst Consultant (Fina...
£300 - £350 per day + competitive: Orgtel: My client, a leading bank, is curre...
£28000 - £32000 per annum + pension, 25 days holiday: Ashdown Group: A highly ...
Negotiable: Randstad Education Birmingham: Randstad Education are seeking a Fi...