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Shell’s Earnings Fall in 2nd Quarter Earnings Fall at Shell and Exxon in 2nd Quarter
(about 4 hours later)
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. Royal Dutch Shell is continuing to struggle with its operations in Nigeria and North America, the company revealed Thursday in announcing earnings that fell below analysts’ forecasts.
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. 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,” analysts from Bernstein wrote in a research note.
Shell’s shares were down 5 percent in London. Shell’s shares were down nearly 5 percent in trading in London.
Exxon Mobil, the largest American oil producer, also disappointed markets on Thursday. It reported second-quarter earnings of $6.9 billion, a 57 percent decline from the same period in 2012. The company said that earnings, excluding divestments and other one-time charges, were down 19 percent for the quarter. The company’s shares were down about 2 percent in trading in New York.
Exxon Mobil said that its results were hurt by lower margins and reduced volumes at its refineries. Production was down 1.9 percent year-on-year for the quarter and 2.7 percent for the half year. Capital and operating expenses were also up 10 percent, to $10.2 billion, for the quarter. Still, “Exxon Mobil’s second-quarter results reflect continued strong operational performance,” its chief executive, Rex W. Tillerson, said in a statement.
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’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.
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. Problems in Nigeria during the quarter had lowered production by about 100,000 barrels a day, or around 40 percent, and had cost the company $250 million, Shell said.
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. 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 L.N.G. tankers from landing at the plant between late June and mid-July until they received a large payment from the operators.
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.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.
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.” Mr. Voser said Shell was reviewing its Nigeria operations and would sell up to 100,000 barrels a day of production onshore, where most of the problems are, preferably to Nigerian players “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.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. Over the last 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 write-downs drop the book value of the portfolio 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. Mr. Voser said that the write-downs 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. Shell’s overall production was down 1 percent to just over three million barrels a 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.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. Other companies have also posted lackluster results, including BP, which reported earnings on 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 allegations of corruption in Algeria.