Shell issues warning of "significantly" lower profits

Royal Dutch Shell was trading four per cent lower this morning following the announcement that the company could see significantly lower profits than recent levels, due to falling oil prices and the rising costs of exploration.

Fourth quarter adjusted earnings in the period on a current cost of supply basis would be $2.9bn (£1.3bn).

Ishaq Siddiqi, market strategist at ETX Capital, commented:

Worrying news from the oil major which is clearly suffering from management’s inability to get on top concerns regarding capital discipline.

For Shell itself, management must now implement more aggressive targets for group strategy in order to turn a page and improve capital efficiency which would go some way in improving operational performance.

The company's full earnings results to be published on 30 January could see poor results in upstream, downstream and corporate business divisions.

The Anglo-Dutch company, which makes up 7.5 per cent of the FTSE 100, said:

Compared with the fourth quarter 2012, Upstream earnings excluding identified items were impacted by higher exploration expenses and lower volumes. A high level of maintenance activity during the fourth quarter 2013 affected high value oil and gas production volumes, including gas-to-liquids, as well as LNG sales volumes.

Earnings were also hit by the weakening of the Australian dollar while upstream Americas continued to incur a loss.

Shell's CEO Ben van Beurden commented:

Our 2013 performance was not what I expect from Shell. Our focus will be on improving Shell's financial results, achieving better capital efficiency and on continuing to strengthen our operational performance and project delivery.