By Justin Scheck and Rory Gallivan
LONDON--Royal Dutch Shell PLC on Thursday reported a rise in
fourth-quarter profit, showing how it is resisting slumping oil
prices, which have fallen more than 50% since the middle of last
year.
The giant Anglo-Dutch oil company's quarterly profit on a
current cost-of-supplies basis--a metric similar to the net profit
reported by U.S. oil companies--was $4.2 billion, compared with
$2.2 billion in the same period last year.
For the full year, the current-cost-of-supplies profit was $22.6
billion, up from $19.5 billion in 2013.
However, Shell shares fell 4% in early European trading because
the earnings came in below analysts' expectations. Analysts at
Bernstein attributed the miss in part to Shell's loss-making North
American shale business.
Shell is the first of the four big, integrated,
non-state-controlled oil companies known as "super majors" to
report earnings for last year's final quarter. Analysts and
investors expect the weaker oil price to weigh heavily on the
companies compared with the year-ago quarter. Shell, though, had
been forecast to suffer less of a year-over-year impact in the
quarter than rivals because its 2013 fourth-quarter earnings were
dragged down by issues including high spending and poor refining
margins, which prompted the company to issue its first profit
warning in a decade.
"Our strategy is delivering with good performance on our three
themes of financial performance, capital efficiency and project
delivery," said Chief Executive Ben van Beurden.
"These will remain Shell's priorities in 2015, as we continue to
balance growth and returns," he added.
Shell said capital expenditure in 2015 is expected to be lower
than 2014 levels, with more than $15 billion of potential spending
to be curtailed over the next three years.
However, one area where Shell will be active is Alaska, where
the company plans to start drilling this year, Chief Financial
Officer Simon Henry said at a news conference. The company's arctic
exploration has been bumpy in recent years, facing weather-related
delays and mechanical problems including the grounding of an
in-transit drill ship at the beginning of 2013.
The company announced a 4% rise in its fourth-quarter dividend
to 47 cents a share.
Shell said earnings in its exploration-and-production division
were $1.73 billion, down from $2.48 billion, with lower oil prices
offsetting benefits such as increased high-margin liquids
production.
Shell said its production for the quarter was 3.213 million
barrels a day of oil and equivalent natural gas volumes a day, down
1% from a year prior.
Shell's processing, or downstream, business reported a sharp
rise in earnings to $1.55 billion from $558 million, "reflecting
steps taken by the company to improve financial performance and the
industry environment."
Shell's revenue in the quarter was $92.4 billion, down from
$109.2 billion a year ago. Net income fell to $773 million from
$1.78 billion.
Since he took over Shell early last year, Mr. van Beurden has
been trying to cut costs across the sprawling firm, scaling back
big spending, most recently when Shell backed away from a proposed
petrochemicals plant in Qatar earlier this month.
But the oil-industry landscape has shifted since Mr. van Beurden
began as CEO: A year ago, Shell was struggling to control high
costs at a time of relatively high oil prices. Now, development
expenses are dropping as the oil price remains depressed.
"We are taking a prudent approach here and we must be careful
not to overreact to the recent fall in oil prices," Mr. van Beurden
said.
Write to Justin Scheck at justin.scheck@wsj.com and Rory
Gallivan at rory.gallivan@wsj.com
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