Voser could still win long game

IF investors were surprised by BP’s sub-par results earlier in the week, they should have been prepared for Royal Dutch Shell’s dismal numbers. Still, the near $1bn net loss at its refining business was eye watering.

It is struggling against the worst downstream conditions in twenty years, as a slump in demand comes hot on the heels of huge investments to increase capacity. Chief executive Peter Voser says he might put 15 per cent of the firm’s refining assets on the block; he could be forgiven for selling even more.

Costs fell by $2bn in the year, although Shell has some catching up to do – arch-rival BP managed to find $4bn of savings last year. Peter Voser has made a solid if uninspiring start, but this is not the time for a softly-softly approach; investors will be looking for more radical cost cutting in 2010.

Voser is unlikely to change the group’s long-game approach however, and will continue spending
huge amounts on exploration and production. Its portfolio is full of high-quality E&P assets, especially in the Asia Pacific regions, where it is engaged in expensive projects that focus on oil sands and natural gas.

That might weigh on the bottom line for now, but Voser is right to prepare for the years ahead, especially as energy use in China and India surges. The shares also offer an impressive prospective yield of 6.3 per cent. Shareholders looking for safe, long-term bet could do much worse. david.crow@cityam.com