Shell profits almost halve on huge impairment charge
Royal Dutch Shell's net profits almost halved in the first quarter on a vast impairment charge on its refineries in Asia and Europe, the Anglo-Dutch oil giant said Wednesday.
Earnings after taxation dived 45 percent to $4.51 billion (3.27 billion euros) in the three months to March, compared with $8.18 billion a year earlier, Shell revealed in a results statement.
The group took a huge impairment charge of $2.9 billion, mostly on the declining value of its refining division, but its share price rose on news of a dividend hike.
Shell added that profit on a current cost of supplies (CCS) basis or current-cost accounting -- which strips out changes to the value of oil and gas inventories -- sank 44 percent to $4.5 billion from $8.0 billion.
Oil and gas production dipped 4.0 percent to 3.25 million barrels of oil equivalent per day in the first quarter, compared with last time around. Revenues slid 2.8 percent to $109.66 billion in the quarter.
The London-listed major added it will sell its downstream refining and marketing businesses in Denmark, and would also consider the sale of its marketing assets in Norway as part of its ongoing overhaul.
- Oil industry under pressure -
"As we saw in 2013, we are in an industry where high volatility remains, both in the macro-environment and in our quarterly results," said chief executive Ben van Beurden.
He added: "The impairments we have announced today in downstream reflect Shell's updated views on the outlook for refining margins.
"There are substantial pressures on the industry from excess capacity, changing product demand, and new oil supplies from liquids-rich shales."
Despite tumbling profits, Shell's share price rallied on Wednesday after the group ramped up its shareholder dividend.
The company declared a dividend of 47 cents per ordinary share, which was 4.0 percent above last year's payout.
Van Beurden, who took over as chief executive at the start of 2014, began his tenure with a surprise profits warning and dire annual results.
The Dutch national has sought to scale back spending on big new projects and launched plans to streamline the business.
"We are making hard choices on Shell's assets and options, to improve capital efficiency, in both upstream and downstream," Van Beurden added on Wednesday.
"The divestments underway in downstream in four countries are part of Shell's drive to improve our competitive position."
Shell had outlined plans in January to sell $15 billion of assets over the next two years, and slash capital spending to $37 billion in 2014.
- Shell shares surge higher -
In late morning deals, Shell's 'B' share price rallied 4.28 percent to 2,535 pence, topping London's FTSE 100 risers board. The FTSE was 0.03 percent higher at 6,771.70 points.
"A busy divestment programme is in train, cash generation remains high, cost savings and further financial efficiencies have been identified, whilst the contribution from Shell's gas businesses in particular (was) robust," said Hargreaves Lansdown analyst Richard Hunter.
"This has enabled a further dividend increase on top of the existing share buyback programme, a sign of confidence in the future."
© 2014 AFP