Royal Dutch Shell reported pre-tax losses of more than £300million yesterday in the final quarter of last year because of the impact of falling oil prices.
On the oil giant’s preferred current cost of supplies (CCS) measure – which it believes better reflects its underlying performance – it posted earnings of £3.35billion for the period, compared with £4.77billion the year before.
The CCS measure does not disguise the fact, however, that using the more-commonly applied pre-tax measure, Shell made losses of £335.7million in the final quarter of 2008, compared with pre-tax profits of £9.56billion a year earlier.
Shell still reported CCS profits of £22.4billion for the year as a whole, up 14% on the previous year, after oil prices in the US peaked at $147 a barrel last summer.
Revenue for 2008 was £327.4billion, against £254.1billion the previous year.
Chief executive Jeroen van der Veer described the fourth-quarter performance as satisfactory given the impact on demand caused by the weaker economy.
He promised, however, to maintain investment at near to last year’s level of £22.5billion to safeguard future profitability.
Mr van der Veer added: “Industry conditions remain challenging, and we are continuing the focus on capital and cost discipline in Shell.”
Shell recently postponed some Canadian oilsand projects because they required high oil prices to justify their development. The price of oil recently fell below $40 a barrel as a result of global economic conditions.
Earnings in the company’s exploration and production division were down 24% to £2.6billion in the quarter, a performance which reflected the impact of hurricanes on its North American operation last summer.
Full-year oil and gas production was broadly in line with the previous year at 3.415million barrels of oil equivalent per day, the company added.
Yesterday’s results were towards the bottom end of City expectations, but Shell cheered investors by announcing an 11% increase in its fourth-quarter dividend. Alan Sinclair, oil and gas analyst at Seymour Pierce stockbrokers, said planned investment for 2009 of around £22.5billion was higher than forecast, but with costs set to come down he said Shell was unlikely to be stretched by this target.
Derek Simpson, joint leader of the union Unite, said: “Shell is feasting while the rest of us face famine. Its profits are the biggest in UK history. A compelling case still remains for a windfall tax on the greedy energy companies. Working families are struggling in the face of the recession – the redistribution of windfall profits would help support Britain through these difficult times.”
BP’s chief executive Tony Hayward told the World Economic Forum in Davos, Switzerland yesterday that an oil price of $60 to $80 a barrel was appropriate and it seemed to him this was needed to get investment.
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