Falling oil and gas prices hit profits at Shell

City A.M. Reporter
WEAKER oil and gas prices took their toll on Royal Dutch Shell’s second-quarter profits while extra maintenance costs on high-margin US Gulf production drove earnings below analysts’ expectations.

Shell, the second largest of the western world oil majors behind Exxon Mobil, said earnings fell to around $5.7bn (£3.6bn) from $6.6bn a year ago on a current cost of supply basis adjusted for special items.

The miss was primarily due to maintenance costs and shutdowns in the US Gulf, where the company has some of its most profitable production, and in Australian Liquefied Natural Gas.

Chief executive Peter Voser said the profit miss included about $500m of costs associated with these factors.

Like its rivals, Shell is battling resource nationalism and competition from Asian rivals to keep growth going, and has to keep one eye on a volatile oil price.

Last week it lost out to much smaller state-owned Thai company PTT in its attempt to add gas reserves for future liquefied natural gas (LNG) production, pulling out of a potential auction for Cove Energy to avoid overpaying. Some 72 per cent of Cove shareholders had accepted PTT's offer by yesterday. “Our industry continues to see significant energy price volatility as a result of economic and political developments,” said Voser in the earnings statement.