Shell's got to sharpen up, says chief, as earnings slide

Shell’s new chief executive Ben van Buerden has laid down a new path for the oil giant, as the company reported its fourth quarter 2013 earnings this morning.

The world’s third-largest oil company made $2.2bn, compared with the $7.4bn made a year earlier.

That's in line with the $2.9bn guidance Shell issued for fourth quarter earnings in January, which excludes $763m of identified items.

Van Buerden has set out a critical new agenda for Shell. The landscape of the company has changed, he said to investors this morning, and “hard choices” are having to be made.

This year, Shell will end its drilling in offshore Alaska. The programme, he said, has “no clear path forward”.

It’s been a pretty rough start to the year for all oil groups, and Shell had already warned that earnings would be “significantly lower”.

It's reported full-year earnings for 2013 of $16.7bn. In 2012, this figure was $27.2bn.

In 2014, Shell’s priorities, said van Buerden, must be for sharper performance and more rigorous capital discipline.

The changes being made to Shell’s portfolio and options will mean more growth, but the company has seen a loss in momentum in operational delivery, and needs to “sharpen up in a number of areas”.

He highlighted improving financial results, better capital efficiency, and stronger operational performance and project delivery as key areas.

Worsening security conditions in Nigeria, project delays, pressured refining margins and slumps in some oil prices have hit the producer hard.

Shell’s belt-tightening will mean increasing the pace of its asset sales by £15bn over the course of 2014/15, and slashing capital spending by around $9bn this year (to $37bn from $46bn).

Yesterday, it announced the cutting of its stake in one of its Brazilian offshore assets for $1bn as it ploughs on with its disposals drive.

Earnings per share plummeted 49 per cent in the fourth quarter 2013 compared with a year earlier. A dividend of $0.45 per ordinary share has been announced.