Shell warns of writedowns as profits plunge

 
Suzie Neuwirth
ROYAL Dutch Shell’s new chief executive yesterday warned that there could be more writedowns in the oil giant’s North American shale interests, oil products and onshore Nigeria, as fourth-quarter results confirmed a mammoth decline in earnings.

Ben van Beurden, who took over from Peter Voser at the start of this year, insisted that “Shell’s long-term strategy is sound,” despite fourth-quarter earnings falling to $2.9bn (£1.8bn) – in line with a profit warning the firm issued earlier this month – down from $5.6bn a year ago.

Dry exploration wells in French Guiana and plummeting gas prices in the US hit Shell’s bottom line, as did tight margins on its European refining business.

The FTSE 100 firm is cutting spending to $37bn in 2014, after a costly 2013 where spending totalled $46bn. It plans to divest $15bn in assets over the next two years as part of its capital efficiency plan, disappointing some analysts who were hoping for more.

“It’s a number we’re confident we can meet,” said van Beurden, who would not disclose which assets would be put on the block.

Security issues continued to impact onshore Nigerian projects, decreasing output by 40,000 barrels of oil per day in the fourth quarter. Van Beurden mooted the possibility of Shell divesting some onshore assets in favour of deepening its offshore or “very profitable” liquefied natural gas business there.

Shell confirmed separately that it has decided to stop its drilling programme offshore Alaska, after a US appeals court ruled that offshore oil permits had been granted without considering the environmental risks. Van Beurden said the legal issues made it “impossible to go ahead”.

Shell increased its first-quarter 2014 dividend by four per cent to $0.47 per share, which it said signals its confidence in its ability to grow free cash flow.

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