Shell misses estimates as capital spending rises

A customer refuels his vehicle at a Shell gas station, operated by Royal Dutch Shell Plc, in Brussels, Belgium, on Tuesday, June 4, 2013. Royal Dutch Shell Plc, BP Plc, Statoil ASA and Platts, the oil-price data collector owned by McGraw Hill Financial Inc., said theyÕre being investigated after the European Commission conducted raids in three countries to ferret out evidence of collusion. Photographer: Jock Fistick/Bloomberg

A customer refuels his vehicle at a Shell gas station, operated by Royal Dutch Shell Plc, in Brussels, Belgium, on Tuesday, June 4, 2013. Royal Dutch Shell Plc, BP Plc, Statoil ASA and Platts, the oil-price data collector owned by McGraw Hill Financial Inc., said theyÕre being investigated after the European Commission conducted raids in three countries to ferret out evidence of collusion. Photographer: Jock Fistick/Bloomberg

Published Nov 1, 2013

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London - Royal Dutch Shell’s third-quarter earnings missed analyst estimates as profits at refineries plunged, disruption in Nigeria cut output and spending increased.

Profit excluding one-time items and inventory changes fell 32 percent to $4.5 billion (R45bn), Europe’s biggest oil company reported yesterday.

That missed the $5.3bn average estimate of 11 analysts.

Spending on projects and acquisitions would reach $45bn this year, the company said, $5bn more than expected.

Oil and gas production slid 2 percent worldwide because of disruptions in Nigeria, while margins at oil refineries fell in the third quarter because of overcapacity in Europe.

Chief executive Peter Voser, who steps down at the end of the year, said the Anglo-Dutch firm would cut net spending next year by increasing the pace of asset sales.

“We are facing headwinds from weak industry refining margins, and the security situation in Nigeria,” he said. “Shell has a strong project flow in place for 2014 and beyond.”

Shell shares fell as much as 5.5 percent to £20.65 (R330) in London, the biggest intraday fall since August.

Earnings from refining and marketing almost halved to $892m in the third quarter from a year earlier, Shell said.

The company pumped 2.931 million barrels of oil equivalent a day in the quarter, about 2 percent lower than a year earlier, amid production interruptions in Nigeria. Net income fell 35 percent to $4.7bn.

“These were very disappointing results, made all the more so by guidance on capex,” analysts at Deutsche Bank said.

Maintenance in Nigeria, Qatar and the UK meant “earnings are likely to remain challenged in the coming quarter”.

Shell has forecast net capital expenditure of about $40bn this year and plans to invest as much as $130bn in 2012-2015.

Shell’s chief financial officer, Simon Henry, defended the company’s investment record. This year’s total included about $10bn in acquisitions including gas assets from Repsol and assets in Brazil, while divestments in Nigeria, the US and UK had been deferred until next year, he said.

“It would be easy to get to cheap headlines and the cheap boost to the stock price by cutting investment,” Henry said. “It’s in nobody’s long-term interest. We take criticism for the time being, so be it. We can afford to invest.” – Bloomberg

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