Shell unveils 70% drop in profits

2009-07-30 08:36:33

Royal Dutch Shell has seen its profits for the April to June period slump 70% from a year earlier, due to the big fall in oil prices since last summer.

The Anglo-Dutch company's profit for the second quarter of 2009 totalled $2.3bn ( 1.4bn).

Its results come two days after rival BP saw its profits for the same period fall 53%, again due to oil price falls.

Global crude prices hit a record $147 a barrel last summer before falling back. US light crude is currently at $63.

Shell's sales for the quarter totalled $63.9bn, down from $131.2bn a year earlier.

Cost cutting

Looking ahead, Shell's chief executive Peter Voser said global demand for oil remained "weak".

"Shell is adapting to this new situation, and we must do more. We are sharpening our focus on delivery and affordability," he said.

Conditions are likely to remain challenging for some time, and we are not banking on a quick recovery

Sheff chief executive Peter Voser

The company said it would continue to cut costs after achieving savings of $700m in the first half of 2009. It said it had now trimmed 20% of senior management positions.

Oil analyst Nick McGregor of Redmayne Bentley, told the BBC that the only disappointment from Shell's results was the fact its crude production was down 6% from a year earlier.

"Production figures are closely watched, and I think this fall was down to external factors, such as Shell's Nigerian output being cut [due to the attacks on oil facilities in the country]," he said.

"It simply means Shell hasn't been able to pump as much oil as it would like, which contrasts with BP's figures earlier in the week, as BP's production was up."

'No quick recovery'

World oil prices fell back from record highs last summer as the global economic bubble burst, and the recession took hold, sparked by the crisis in the credit markets.

Crude prices fell as low as $30 a barrel at the start of the year, but have since recovered to around the $63 level.

Shell's profits are reported under the current cost of supply basis. Excluding one-off items, including reduced staff healthcare costs in the US, its latest quarterly profits totalled $3.2bn, ahead of market expectations.

"Conditions are likely to remain challenging for some time, and we are not banking on a quick recovery," added Mr Voser.