Shell's new boss warns on profits as Nigerian sabotage hits output

Cynical investors say alert is 'kitchen sink job' to make expectations easier to beat

The new chief executive of the oil giant Shell dropped a bombshell on investors yesterday with a major profit warning just two weeks into the job.

Ben van Beurden, the Dutchman who took over from Peter Voser tow weeks ago, warned that fourth-quarter profit would be "significantly lower" than last year due low production volumes, high exploration costs and continued problems with refining. Security problems in the volatile Nigerian Delta were also blamed.

Mr van Beurden declared that this "was not what I expect from Shell", and forecast that profits for the final quarter would come in at just $2.2bn (£1.3bn), less than a third of its $7.3bn surplus a year earlier.

Shares in the company tumbled sharply in the morning, wiping as much as £6.5bn off its stock market value. But they later recovered to close down only 1 per cent, or 26.5p, at 2,279.5p.

Analysts explained the partial recovery in the shares as being the result of that classic trick of the "new broom" boss – to say the business is in a poor state, so as to take the credit for any improvements. "Bulls will be saying this is just a kitchen sink job," said one analyst.

Others said Shell had reported poor numbers last year, so it was not an entirely new trend.

Analysts had been expecting profits of around $4bn. Profits for 2013 as a whole are now forecast to fall by about 38 per cent to $16.8bn, Europe's largest oil company said.

Mr van Beurden 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 $700m charge on 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 also played a part in the profit decline, it said.

Its 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 $20bn project to build a gas processing plant in Louisiana.

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

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Content Writer - Global Financial Services

£25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Web Developer - PHP

£35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Field Sales Consultant - Financial Services - OTE £65,000

£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Loan Underwriter

£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...

Day In a Page

Orthorexia nervosa: How becoming obsessed with healthy eating can lead to malnutrition

Orthorexia nervosa

How becoming obsessed with healthy eating can lead to malnutrition
Lady Chatterley is not obscene, says TV director

Lady Chatterley’s Lover

Director Jed Mercurio on why DH Lawrence's novel 'is not an obscene story'
Farmers in tropical forests are training ants to kill off bigger pests

Set a pest to catch a pest

Farmers in tropical forests are training ants to kill off bigger pests
Mexico: A culture that celebrates darkness as an essential part of life

The dark side of Mexico

A culture that celebrates darkness as an essential part of life
Being sexually assaulted was not your fault, Chrissie Hynde. Don't tell other victims it was theirs

Being sexually assaulted was not your fault, Chrissie Hynde

Please don't tell other victims it was theirs
A nap a day could save your life - and here's why

A nap a day could save your life

A midday nap is 'associated with reduced blood pressure'
If men are so obsessed by sex, why do they clam up when confronted with the grisly realities?

If men are so obsessed by sex...

...why do they clam up when confronted with the grisly realities?
The comedy titans of Avalon on their attempt to save BBC3

Jon Thoday and Richard Allen-Turner

The comedy titans of Avalon on their attempt to save BBC3
The bathing machine is back... but with a difference

Rolling in the deep

The bathing machine is back but with a difference
Part-privatised tests, new age limits, driverless cars: Tories plot motoring revolution

Conservatives plot a motoring revolution

Draft report reveals biggest reform to regulations since driving test introduced in 1935
The Silk Roads that trace civilisation: Long before the West rose to power, Asian pathways were connecting peoples and places

The Silk Roads that trace civilisation

Long before the West rose to power, Asian pathways were connecting peoples and places
House of Lords: Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled

The honours that shame Britain

Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled
When it comes to street harassment, we need to talk about race

'When it comes to street harassment, we need to talk about race'

Why are black men living the stereotypes and why are we letting them get away with it?
International Tap Festival: Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic

International Tap Festival comes to the UK

Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic
War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border