An increasing number of oil thefts from Nigeria and rising costs took their toll on Royal Dutch Shell after the oil supermajor revealed a ‘disappointing’ second quarter earnings fall.
Second quarter earnings were $2.4billion, down from the $6billion posted 12 months previously, which inclued a net impairments charge of $2.2billion.
Adjusted second quarter net earnings, on a current cost of supply (CCS) basis, were $4.6 billion, also down on last year by more than $1billion.
“Higher costs, exploration charges, adverse currency exchange rate effects and challenges in Nigeria have hit our bottom line,” said outgoing chief executive Peter Voser, who announced his retirement in May.
“These results were undermined by a number of factors – but they were clearly disappointing for Shell.”
Half year upstream earnings were $9,174million, compared to $10,797 million on the same period last year, while downstream earnings were $3,016million compared to $2,418million in 2012.
Production in the second quarter dropped 1% to 3,062,000 boed, down 1% as Nigeria’s deteriorating situation cost around 100,000 boed.
Shell said ongoing thefts from Nigerian supplies had cost it around $700million this quarter, with the Nigerian government facing a $12billion bill this year in lost revenue.
Earlier this month the company closed the Trans Niger Pipeline because of a new leak, just days after it was reopened following a spate of thefts.
“We will play our part, but these are problems Shell cannot solve alone,” Voser said.
The company confirmed it was still looking to sell off assets as part of its ongoing divestment programme, with $4billion completed in the last year alone.
Onshore operations in Nigeria and North America are currently being reviewed over potential divestment in both regions as it looks to narrow its portfolio.
“We’ve made substantial improvements to our portfolio in the last few years,” said Voser, who will be replaced by former downstream director Bert van Beurden as chief executive at the end of the year.
“Today, Shell is rich with new investment opportunities and is capital constrained – the opposite position to where the company was in the middle of the last decade.
“Our strategy is to deliver sustainable growth in cash generation through the business cycle, underpinning Shell’s competitive dividends and returns. We are not targeting oil and gas production volumes; rather we are focusing on financial performance.”
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