Royal Dutch Shell profit drop weakens FTSE

Royal Dutch Shell has announced this morning that its third quarter profits were down 32 per cent to $4.2bn (£2.62bn), compared with $6.2bn (£3.86bn) for the same period in 2012. (Release)

The oil and gas giant has blamed weaker industry refining conditions, a rise in operating and explorations costs and a challenging environment in Nigeria which, chief executive officer Peter Voser says, continues to "erode the near term outlook".

Michael van Dulken, head of research and Accendo Markets, says that Shell is "wholly responsible" for the weakness in the FTSE this morning "with its 7.5 per cent weighting and 4.7 per cent share price decline taking a mighty 22 points from the UK flagship index."

The group's third quarter production was 2,931 thousand barrels of oil equivalent per day (boe/d), compared with 2,982 thousand boe/d a year ago. The deteriorating security situation in Nigeria impacted production volumes for the quarter by some 65,000 boe/d.

Income before taxation was down 29 per cent like-for like, at $8,962m in 2013, compared with $12,683m in 2012. The third quarter was up on the second quarter of this year, however, which saw income of $5,372m. In the first nine months of the year, 2013 saw a 27 per cent fall to $27,632m (2012: $38,065m).

Exploration cost Shell $1,636m in the last quarter, compared with $713m the previous year. Its maintenance and asset replacement activities, it said, diminished production.

Upstream developments in Iraq, the US, Australia and Brazil are all on track and Shell has announced an interim dividend of $0.45 per ordinary share - an increase of $0.02 equivalent for the same quarter last year.

Shell shares slumped this morning. Van Dulken said, "today’s weakness keeps the stock in its falling channel and implies downside potential to 2040p."