• 3 minutes 2nd Annual Great Oil Price Prediction Challenge of 2019
  • 6 minutes "Leaked" request by some Democrats that they were asking Nancy to coordinate censure instead of impeachment.
  • 11 minutes Trump's China Strategy: Death By a Thousand Paper Cuts
  • 14 minutes Democrats through impeachment process helped Trump go out of China deal conundrum. Now Trump can safely postpone deal till after November 2020 elections
  • 1 hour Shale Oil Fiasco
  • 3 hours Everything you think you know about economics is WRONG!
  • 5 hours Judiciary impeachment: Congressman says Sean Misko, Abigail Grace and unnamed 3rd (Ciaramella) need to testify.
  • 7 hours READ: New Record Conoco Eagleford Vintage 5 wells, their 5th generation Test Wells . . Shale going bust . . . LAUGHABLE
  • 2 hours Quotes from the Widowmaker
  • 6 hours Offshore is changing
  • 2 days Aramco to Drop $133B on Drilling over Decade
  • 19 hours You long it you short it it is Here for a long time since Trump signed it
  • 3 hours Tesla Launches Faster Third Generation Supercharger
  • 1 day Global Debt Worries. How Will This End?
  • 22 hours Wonders of US Shale: US Shale Benefits: The U.S. leads global petroleum and natural gas production with record growth in 2018
  • 1 day IEA predicts oil demand will grow annually at 1 million barrels a day for the next 5 years
James Burgess

James Burgess

James Burgess studied Business Management at the University of Nottingham. He has worked in property development, chartered surveying, marketing, law, and accounts. He has also…

More Info

Perfect Storm of Problems Forces Shell to Announce 48% Drop in Earnings

On Friday, ahead of the official date of release for its full earnings report (30th of January), Shell has decided to warn the market and its investors, that due to across-the-board problems the company will post much lower fourth quarter earnings than predicted.

Chevron Corp were forced to offer a similar warning last week; a sign of just how much pressure the industry is under as it tries to balance the issue of replacing depleting reserves, rising costs, and lower oil prices.

Ben van Beurden, the new CEO of Shell, remarked that the “2013 performance was not what I expect,” after having to cut fourth quarter adjusted earnings to just $2.9 billion, down from expectations of roughly $4 billion.

Related article: Shell, Gazprom Neft Eye Siberia’s Bazhenov as Next Bakken

Reuters reports that the last time the company reported such a low figure was in 2009, and that since then it has been averaging around $5.6 billion a quarter.

Analysts blame a perfect storm of problems over the past three months for the dismal earnings, claiming that profit margins in the refinery sector have fallen, production costs have increased, Nigerian output has suffered, and the Australian dollar, where Shell is developing some of its largest projects, has taken a dive.

Carsten Fitch, from Commerzbank, said that “Shell’s profit warning is a confirmation of the impact of the downward trend in oil prices we've seen. In particular, the refined product markets in Europe have been very weak;” where Shell has a huge number of its refining operations.

Under Peter Vosser, van Beurden’s predecessor, Shell began to focus on the liquid natural gas (LNG) business, turning the company into a world leader in the sector, but Barclays explains that “with nearly a fifth of its LNG portfolio down for maintenance, the final quarter of 2013 was never likely to be a good quarter for Royal Dutch Shell.”

Related article: Shell Expected to Sell $15 Billion of Assets During the Next Two Years

With the arrival of van Beurden investors have been hopeful that the company’s spending will be more tightly controlled in order to improve cash flow and strengthen the core of the business. Van Beurden stated that “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.”

Unfortunately this is now the third straight quarter of disappointing earnings and the NY Times claims that it will take more than just a new CEO to turn the company around quickly. The oil industry is a long-term business requiring years to develop projects before they can begin to contribute positively to earnings.

By. James Burgess of Oilprice.com



Join the discussion | Back to homepage

Leave a comment

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News
Download on the App Store Get it on Google Play