Refinery fears overshadow Shell’s results

 
Marion Dakers
ROYAL Dutch Shell disappointed markets yesterday despite posting fourth-quarter earnings of $5.7bn (£3.5bn).

The firm made $18.6bn during 2010, an increase of 90 per cent on last year when the effects of inventory changes are stripped out.

But Shell’s UK-listed shares closed down three per cent to £22 in trading yesterday, with analysts expressing concern over continued weakness in the refining business, where several major facilities have been down for long periods during the last two years.

“Refining conditions...do remain overall very difficult,” said Shell’s chief financial officer Simon Henry. It plans to sell off several refineries this year.

In the firm’s upstream business, Shell lost $260m after drilling was halted in the Gulf of Mexico last April, including a $70m charge “for the cost of the idled rigs, to keep those rigs warm, ready to drill”, according to Henry.

Shell’s overall oil production in the last quarter of 2010 stood at 3.5m barrels of oil equivalent per day, up five per cent on a year ago.

Shell aims to raise its oil and gas production by 11 per cent in the three years to 2012, including new drilling projects in the Gulf.

The firm is set to spend $27bn on fresh exploration this year – slightly higher than last year’s expenditure.

However, its plans to drill offshore in Alaska have been put on hold for this year, Henry told reporters yesterday, as the firm has not yet been granted an environmental permit.