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Shell sees its profits plunge

ROYAL Dutch Shell posted a 75 percent fall in fourth-quarter profits to $1.18bn (£720m) yesterday as falling output and depressed refining and natural gas businesses took their toll.

Oil prices recovered in the quarter but gas prices were much lower than in the same period a year earlier, while refining margins collapsed to their lowest level in almost 15 years.

Europe’s second largest oil company by market value said it made a $1.76bn loss in its refining unit.
Company chief executive Peter Voser said he was considering the sale or closure of 15 per cent of Shell’s refining portfolio.

A further 1,000 jobs – on top of 5,000 already announced – will also be axed as a result of declining profits, the company said.

Commenting on how the company had spent too much when profits were soaring he said: “When you eat too much, you get a bit fat.”

He added: “We simply must do better. Cost focus is now embedded in our day-to-day operations. We are not assuming there will be a quick recovery, and the outlook for 2010 is uncertain.”

He said a further $1bn would be cut from costs this year on top of $2bn last year.

Oil and gas production fell 2.4 per cent to 3.3m barrels of oil equivalent per day in the quarter compared to the same period last year. Full year output was down three per cent, company figures showed.

Shell’s results compare with a 23 per cent drop in fourth-quarter net income at the largest western oil company by market value, Exxon Mobil, and a 37 per cent drop at the second-largest US oil company, Chevron.

However, UK rival BP managed to report a 33 per cent rise in profits in the quarter thanks to its lower reliance on refining and natural gas.

However, its annual profit was well down in the face of oil price drops.