Shell's Q1 Earnings Down by 62.3% from Lower Oil Price

Royal Dutch Shell posted a 62.3% fall in adjusted net profit for the first quarter as a lower oil price and weak demand for oil products affected its upstream and downstream operations.

1ST QUARTER 2009 UNAUDITED RESULTS

  • Royal Dutch Shell’s first quarter 2009 earnings, on a current cost of supplies (CCS) basis, were $3.3 billion compared to $7.8 billion a year ago. Basic CCS earnings per share decreased by 57% versus the same quarter a year ago.
  • Cash flow from operating activities for the first quarter 2009 was $7.6 billion. Net capital investment for the quarter was $6.9 billion. Total cash returned to shareholders in the form of dividends was $2.4 billion.A first quarter 2009 dividend has been announced of $0.42 per share, an increase of 5% over the US dollar dividend for the same period in 2008.

Royal Dutch Shell Chief Executive Jeroen van der Veer commented, "First quarter 2009 performance was affected by the weaker global economy, with a challenging Upstream and Downstream business environment. As we announced previously, our dividend for first quarter 2009 will be $0.42 per share, an increase of 5%. We continue to make significant investments in the company for future profitability. Industry conditions remain challenging, and our focus is on capital discipline and costs. We are taking a prudent approach to this downturn, focused on sustaining a strong position in the energy landscape. Shell people, operational excellence, good investments and technology are our cornerstones for the future."

KEY FEATURES OF THE FIRST QUARTER 2009

  • First quarter 2009 CCS earnings were $3,297 million, 58% lower than in the same quarter a year ago.
  • First quarter 2009 reported earnings were $3,488 million compared to earnings of $9,083 million in the same quarter a year ago.
  • Basic CCS earnings per share decreased by 57% versus the same quarter a year ago.
  • Total cash returned to shareholders in the form of dividends in the first quarter 2009 was $2.4 billion.
  • Cash flow from operating activities, excluding net working capital movements, was $7.9 billion compared to $14.1 billion for the same quarter last year. Including net working capital movements, cash flow from operating activities was $7.6 billion compared to $16.9 billion for the same quarter last year.
  • Capital investment for the first quarter 2009 was $7.1 billion. Net capital investment (capital investment, less divestment proceeds) for the first quarter 2009 was $6.9 billion.
  • Return on average capital employed (ROACE), on a reported income basis (see Note 3), was 14.1%.
  • Gearing was 6.6% at the end of the first quarter 2009 versus 1.9% at the end of the first quarter 2008.
  • Upstream oil and gas volumes were impacted by ongoing security challenges in Nigeria, OPEC quota restrictions and weakening industrial demand for natural gas. Refinery intake and marketing and chemicals sales volumes were impacted by the weak economic environment across all regions.
  • Oil and gas production, including oil sands production, for the first quarter 2009 was 3,396 thousand barrels of oil equivalent per day (boe/d). Excluding the impact of divestments, production sharing contracts (PSC) pricing effects, OPEC quota restrictions and impacts from the security situation in Nigeria, production was broadly similar to the same quarter last year.
  • Liquefied Natural Gas (LNG) sales volumes of 3.06 million tonnes were 13% lower than in the same quarter a year ago. Excluding the impacts from the security situation in Nigeria, LNG sales volumes were broadly similar compared to the same quarter last year.
  • Oil Products marketing sales volumes were 6% lower than in the first quarter 2008. Excluding the impact of divestments, marketing sales volumes decreased by 3%. Chemical product sales volumes in the first quarter 2009 decreased by 21% compared to the first quarter 2008.
  • Oil Products refinery availability was in line with the first quarter 2008 at 92%. Chemicals manufacturing plant availability was 92%, 3% lower than in the first quarter 2008. Oil Sands upgrader availability was 96% compared to 94% in the same quarter last year.
  • Exploration & Production earnings included a net gain of $345 million, reflecting gains from divestments of $65 million, tax credits of $235 million and a gain of $96 million related to the mark-to-market valuation of certain UK gas contracts, which were partly offset by a charge related to a pension adjustment for inflation in the USA of $51 million. Earnings for the first quarter 2008 included a net charge of $66 million.
  • Gas & Power earnings included a charge of $15 million related to a pension adjustment for inflation in the USA of $14 million and a charge of $1 million related to the mark-to-market valuation of certain gas contracts. Earnings for the first quarter 2008 included a charge of $11 million.

First quarter Exploration & Production segment earnings were $1,697 million compared to $5,143 million a year ago. Earnings included a net gain of $345 million related to identified items, compared to a net charge of $66 million in the first quarter 2008.

Earnings compared to the first quarter 2008 reflected the impact of lower oil and gas prices on revenues, lower oil production volumes, higher exploration expenses, mainly related to on going amortisation of leasehold license costs, and non-cash pension charges, which were partly offset by lower royalty expenses.

Global liquids realisations were 54% lower than in the first quarter 2008. Global gas realisations were 15% lower than a year ago. Outside the USA, gas realisations decreased by 2% whereas in the USA gas realisations decreased by 50%.

First quarter 2009 production (excluding oil sands bitumen production) was 3,321 thousand barrels of oil equivalent per day (boe/d) compared to 3,438 thousand boe/d a year ago. Crude oil production was down 7% and natural gas production was in line with the first quarter 2008.

Underlying production, compared to the first quarter 2008, increased by some 200 thousand boe/d from new fields start-ups and the continuing ramp-up of fields started up in recent years, more than offsetting field declines.

First quarter portfolio developments

In Russia, the Sakhalin II project (Shell share 27.5%) delivered first gas production from the Lunskoye A platform and also commenced LNG exports. The Sakhalin II project is expected to deliver 395 thousand boe/d of peak production (100% basis) after full ramp-up.

In the USA, the final investment decision (FID) was taken on the Caesar Tonga project (Shell share 22.4%), with estimated peak production of 40 thousand boe/d (100% basis).

Also in the USA, Shell was the apparent highest bidder on 39 of 54 blocks in Lease Sale 208 in the Gulf of Mexico.

In Guyana, Shell acquired a 25% interest in the Stabroek exploration licence covering an area of some 47 thousand km2.

In Abu Dhabi, Shell signed an agreement with Abu Dhabi National Oil Company (ADNOC) to extend the GASCO Joint Venture for a further twenty years. GASCO’s operations are mainly focused on gas processing and natural gas liquid (NGL) extraction.

First quarter Gas & Power segment earnings were $514 million compared to $948 million a year ago. Earnings included a charge of $15 million related to identified items, compared to a charge of $11 million in the first quarter 2008.

Earnings compared to the first quarter 2008 mainly reflected lower LNG earnings, reduced gas-to-liquids product prices, lower natural gas and power trading contributions and non-cash pension charges.

LNG earnings were lower than in the same quarter last year reflecting lower LNG sales volumes and the impact of lower oil prices on LNG revenues. In addition, lower dividends were received from an LNG joint venture due to payment timing differences. These were partly offset by higher income from LNG cargo diversion opportunities and the benefit of recent sales contract renegotiations.

LNG sales volumes of 3.06 million tonnes were 13% lower than in the same quarter a year ago. Compared to the first quarter 2008, volumes increased following the start-up of Train 5 at the North West Shelf project and the start-up of the Sakhalin II LNG production. This growth was more than offset by lower volumes from Nigeria LNG due to natural gas supply disruptions. Excluding the impacts from the security situation in Nigeria, LNG sales volumes were broadly similar compared to the same quarter last year.

Natural gas and power marketing and trading earnings were lower than in the same quarter a year ago, reflecting increased contributions from Europe, which were more than offset by reduced earnings in North America.

First quarter portfolio developments

In Russia, following the start-up of LNG production, the first LNG cargo was lifted from the Sakhalin II project (Shell share 27.5%), which will have an LNG capacity of 9.6 million tonnes per annum (100% basis) after full ramp-up.

First quarter Oil Sands segment results were a loss of $42 million compared to earnings of $249 million in the same quarter last year.

Earnings compared to the first quarter 2008 reflected the impact of lower oil prices on revenues, higher operating costs, higher royalty expenses and non-cash pension charges, which were partly offset by higher underlying production volumes.

Bitumen production compared to the same quarter last year decreased by 11%. Bitumen production, excluding the one-off effect of the royalty revision in the first quarter 2008, resulted in an increase of the underlying production of 4%. Upgrader availability was 96% compared to 94% in the same quarter last year.

 

Events  SUBSCRIBE TO OUR NEWSLETTER

Our Privacy Pledge
SUBSCRIBE


Most Popular Articles


From the Career Center
Jobs that may interest you
Regional Sales Manager
Expertise: Business Development|Sales
Location: Houston
 
Associate Product Manager / Product Manager Job
Expertise: Business Development|Marketing|Sales
Location: Minneapolis, MN
 
Senior Accounting Manager/Scheduler
Expertise: Accounting
Location: Wichita, KS
 
search for more jobs

Brent Crude Oil : $54.46/BBL 0.96%
Light Crude Oil : $51.68/BBL 1.21%
Natural Gas : $3.44/MMBtu 1.99%
Updated in last 24 hours