This article is from the source 'nytimes' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at http://www.nytimes.com/2013/08/02/business/global/shell-reports-disappointing-earnings-in-second-quarter.html

The article has changed 5 times. There is an RSS feed of changes available.

Version 0 Version 1
Shell’s Earnings Fall in 2nd Quarter Shell’s Earnings Fall in 2nd Quarter
(about 4 hours later)
LONDON — Royal Dutch Shell, the oil and natural gas giant, followed other oil producers in announcing earnings below analysts’ forecasts for the second quarter. Shell’s income, adjusted for one-time items, was $4.6 billion, compared with $5.7 billion in the same period a year earlier. Analysts expected the company to earn $5.8 billion. LONDON — Royal Dutch Shell, the oil and gas giant, is continuing to struggle in Nigeria and North America, the company revealed Thursday in announcing earnings that fell below analysts’ forecasts.
“These results were undermined by a number of factors, but they were clearly disappointing for Shell, " the company’s chief executive, Peter R. Voser, said in a statement Thursday. Shell’s second-quarter income, adjusted for one-time items, was $4.6 billion, compared with $5.7 billion in the same period a year earlier. Analysts had expected the company to earn $5.8 billion. “This is one of the worst set of Shell results that we can remember,” wrote analysts from Bernstein in a research note.
Mr. Voser blamed the sharp decline on higher costs, foreign-exchange issues and production lost as a result of sabotage in Nigeria, an important area for Shell. Shell said the problems in Nigeria had lowered production by an average of 100,000 barrels a day during the quarter. Shell said it was reviewing its troubled Nigerian onshore operations and might sell leases producing up to 100,000 barrels per day. The company said the deteriorating security situation in Nigeria as well as a blockade of its Nigerian liquefied natural gas joint venture cost at least $250 million in the quarter. Shell’s shares were down 5 percent in London.
Shell, based in London, also took net write-offs of $1.85 billion, including a write-down of about $2 billion on natural gas acreage in the United States, where a decline in fuel prices has led the company to re-evaluate its holdings. Shell’s chief executive, Peter Voser, told reporters that the situation in Nigeria, where Shell normally obtains close to 9 percent of its world production, was worsening. The country has long been a mainstay for Shell, but production there has been dogged by political and environmental issues.
Shell also said it was reviewing its North American exploration and production portfolio, where it has been losing money. This exercise, the company said, will lead to divestments and a sharper focus on fewer projects. Problems in Nigeria during the quarter had lowered production by about 100,000 barrels per day, or around 40 percent, and had cost the company $250 million, Shell said.
Mr. Voser said this year that he would step down as chief executive at the start of 2014. Shell announced last month that he would be succeeded by Ben van Beurden, a relatively unknown executive who has headed Shell’s large marketing and refining business since January. Nigerian output was hit not only by the usual “bunkering,” or sabotage aimed at stealing oil from pipelines, but also by an extraordinary legal dispute between the Nigerian maritime authorities and a liquefied natural gas facility in which Shell is a partner. In the most serious episode, the maritime authorities kept LNG tankers from landing at the plant between late June and mid-July until they received a large payment from the operators.
Other companies have also posted lackluster results, including BP, which reported earnings Tuesday, and ENI of Italy, which is releasing results Thursday. BP, which made substantial divestments after the oil spill in the Gulf of Mexico in 2010, blamed lower oil prices and higher tax rates, especially in Russia, while ENI was hurt by continuing problems, including an investigation into alleged corruption in Algeria at its Saipem engineering and oil services subsidiary. Mr. Voser said oil theft and disruptions to gas supply were causing widespread environmental damage and could cost the Nigerian government up to $12 billion per year. “We will play our part, but these are problems Shell cannot solve alone, " Mr. Voser said.
Shell’s results were also hurt by big bets on natural gas. The company’s production of oil, which tends to be substantially more profitable than gas at current prices, declined 7 percent, compared with the same period a year earlier, while gas output increased 5 percent. Shell’s overall production was down 1 percent to just over three million barrels per day. Its output for the quarter was slightly less than that of its rival BP if the company’s share of almost 20 percent of output from Rosneft, the Russian state-controlled oil company, is included. Mr. Voser said Shell was reviewing its Nigeria operations and would sell up to 100,000 barrels per day of production onshore, where most of the problems are, preferably to Nigerian players in order “to have local stakeholders involved in the production of onshore assets.”
Shell also said it was reviewing its exploration and production portfolio in North America, where it has been losing money. The exercise, the company said, will lead to divestments and a sharper focus on fewer projects.
Over the past five years, the company has invested heavily in shale gas and oil properties, building up a $28 billion portfolio. Based on drilling and exploration results in recent months, Shell is writing off about $2 billion after taxes in the shale oil areas after taking previous writedowns on shale gas acreage. The writedowns bring the book value of the portfolio down to about $24 billion.
Mr. Voser said the writedowns represented a relatively low proportion of the North American shale portfolio, but that they reflected continued problems in the Americas, an important area for Shell. Bernstein estimated that Shell lost $4.54 for every barrel it produced in the Americas, the location of almost one quarter of its output.
Shell’s overall production was down 1 percent to just over three million barrels per day. Its output for the quarter was slightly less than that of its rival BP if the company’s share of almost 20 percent of output from Rosneft, the Russian state-controlled oil company, is included.
Mr. Voser said this year that he would step down as chief executive in 2014. Shell announced last month that he would be succeeded by Ben van Beurden, a relatively unknown executive who has headed Shell’s large marketing and refining business since January. Mr. Voser described Mr. van Beurden as “a great guy” and said that for the next few months he would continue to run the company while Mr. van Beurden focused on marketing and refining.
Other companies have also posted lackluster results, including BP, which reported earnings Tuesday, and ENI of Italy, which on Thursday reported a 55 percent decline in profits for the quarter, compared with the period last year. BP, which made substantial divestments after the oil spill in the Gulf of Mexico in 2010, blamed lower oil prices and higher tax rates, especially in Russia, while ENI was hurt by continuing problems at its Saipem engineering and oil services subsidiary, including an investigation into alleged corruption in Algeria.