Shell issues profit warning: Q4 results to disappoint on production, costs woes
In this Thursday, March 24, 2011 photo, a cluster of houses is seen in Port Harcourt in Nigeria's Delta region. (AP / Sunday Alamba)
Published Friday, January 17, 2014 7:38AM EST
AMSTERDAM, Netherlands -- Royal Dutch Shell PLC has issued a profit warning for the fourth quarter, saying results will be worse than most analysts are expecting due to a mix of lower production, higher costs, and a worse performance by its refining division.
The company on Friday gave provisional, unaudited figures of net profit of $1.8 billion for the quarter, down from $6.7 billion in the same period a year ago.
Chief executive Ben van Beurden said in a statement the results were "not what I expect from Shell."
Dutchman Van Beurden took over the top job from Peter Voser, who is retiring, just two weeks ago.
The company is not due to release full fourth quarter results until Jan. 30, but added that its earnings, stripping out one-time charges and measured on a "current cost of supplies" basis, which strips out fluctuations in the price of oil, would have been $2.9 billion, versus $5.6 billion in the same period a year ago.
In a summary of its difficulties, Shell offered a laundry list of problems at its production arm -- which usually accounts for the bulk of its earnings.
The company said that it had a "high level of maintenance activity" in the quarter, disproportionately at its most profitable operations, including where it sells gas it has transformed to liquid form.
Shell said Friday earnings were also hurt by the weaker Australian dollar; and its American production activities operated at a loss.
The company has also suffered frequent shut downs in Niger's restive river delta due to attacks -- or vandalism -- of its pipelines.
In December. the company said it had made a difficult choice to cancel a $20 billion project to build a facility to convert cheap natural gas to liquid in Louisiana. At the time, Voser described that as tough decision made only because the company had even more attractive opportunities elsewhere.
He used the same argument in July when he booked a $2.1 billion impairment on the value of the company's U.S. shale assets and began disposing shale gas assets in Colorado, Texas and Kansas.