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Fri, Jul 31, 2009 - Page 10 News List

Shell profit falls 67 percent in Q2

AP , AMSTERDAM

A Shell employee delivers fuel to a gas station in Bexley, England, on Wednesday. Royal Dutch Shell, Europe’s largest oil company, plans to reduce capital expenditure by about 10 percent next year and make further job cuts, saying the economy won’t recover any time soon.

PHOTO: BLOOMBERG

Royal Dutch Shell PLC said yesterday its net profit fell 67 percent in the second quarter to US$3.82 billion, reflecting a sharp decline in oil prices and worse refining margins.

In the same period a year earlier, Shell had profit of US$11.6 billion. Sales at Europe’s largest oil company were US$63.9 billion, down from US$131.4 billion.

“Energy demand is weak,” CEO Peter Voser said in a statement. “There is excess capacity in the market and industry costs remain high.”

He said the company was “not banking on a quick recovery” in the global economy.

At Shell’s exploration and production arm, earnings fell 77 percent to US$1.33 billion.

Production was down 6 percent to 2.9 million barrels of oil and equivalents per day, while prices realized by the company were US$52.62 per barrel, from US$111.92 a year ago.

“The industry outlook remains a challenging one, despite the rally in oil prices” from their winter lows, Voser said.

In the first quarter of this year, the company’s average selling price was US$42.16 per barrel.

At Shell’s refining arm, earnings were down 74 percent to US$1.16 billion, as a result of lower refinery intake, worse margins and a US$611 million charge to write down asset values.

Voser said plans to combine the company’s three production arms into two — the US and the rest of the world — were proceeding as planned.

He said the number of “top managers” at Shell had been reduced by 20 percent, leaving 600, and repeated earlier statements that there would be further “substantial” job losses among lower ranks, but didn’t specify how many.

When the reorganization was announced last month, Shell employed 102,000.

Voser said the company had reduced operating costs by US$700 million in the first half of the year from a year earlier by wrangling discounts from suppliers and reducing discretionary spending.

Shell said on Tuesday it would reduce capital spending next year to US$28 billion, from an expected US$31 billion this year.

It said it would keep its dividend per share at US$0.42, an increase of 5 percent from a year ago and the same as in the first quarter of 2009.

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