First-quarter profits tumble at Shell

Rhian Nicholson
29.04.09 10:24

Plunging oil prices and falling demand have sent first-quarter profits spiralling down at oil titan Royal Dutch Shell (RDSB).

Profits for the first three months of the year fell 58% from the same period last year and 31% from the previous quarter to $3.3 billion as the cost of a barrel of oil tumbled from highs of $147 in July to around $42 in recent months.

Yesterday, rival BP (BP-) reported a 62% plunge in profits to $2.5 billion.

Shell said it produced 3,396 barrels of oil and gas a day throughout the first quarter - down 3% on the same period the previous year due to restrictions in output imposed by the oil producer cartel OPEC, weaker industrial demand and ongoing security problems in Nigeria.

Chief executive Joroen van der Veer said the weaker global economy had produced tough challenges for its exploration and retail businesses. Europe's largest oil group by market value saw big profit drops in oil refining and fuel retailing with its petrochemicals division also posting a loss.

Van der Veer said the Anglo-Dutch group would now focus on "capital discipline and costs".

"We are taking a prudent approach to this downturn, focused on sustaining a strong position in the energy landscape," he said.

Tony Shepherd of broker Collins Stewart said: "In the circumstances, with much lower oil prices and challenging markets, Royal Dutch Shell has produced a resilient set of results. However, it has been achieved with a much stronger than expected performance from Oil Products which offset the disappointing performance in E&P, Oil Sands and Gas & Power.

"In Q1, crude oil production was 7% lower and natural gas volumes were unchanged. Given the weaker global economy and challenging business environment for both Upstream and Downstream, we are surprised there is no reference to potential cost saving measures in the statement."

Earlier this year, Shell said it would maintain net investment at around last year's level of �32 billion to support future profit levels as it moves into expensive areas of production such as tar sands.

However, chief financial officer Peter Voser, who takes the helm of the group in July, said that oil prices are likely to remain under pressure in the coming 12 to 18 months as the global economy attempts to get back on its feet.

Meanwhile, shareholders are in line for $2.4 billion worth of dividends, working out at 42 cents a year - a 5% rise on the same quarter a year ago.

First-quarter profits tumble at Shell

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