European oil giant Royal Dutch Shell announced a profit decline of 45 percent in the first quarter, compared with a year earlier, as a drop in the company’s production of oil hurt its profits. Shell reportedly earned $4.5 billion in the first quarter, compared with $8.2 billion a year earlier. Shell is based in the Dutch city of The Hague.
Oil production declined 9 percent compared with last year’s first quarter, to an average of 3.24 million barrels per day. The decline in oil production was attributed to continued security problems in Nigeria and a government-ordered reduction of gas output in the Netherlands. To increase output, the company has started production at its giant Majnoon field in Iraq. Shell has also focused investment on the liquefied natural gas business in recent years.
The company also took a large write-off in its refining business in the quarter. The $2.9 billion in write-downs, mostly on the value of Shell’s marketing and refining units in Europe and Asia, had a significant impact on earnings. Excluding those large one-time factors, earnings were $7.3 billion, down just 3 percent from the same period last year. According to Peter Hutton, an analyst at RBC Capital Markets in London, that number was 48 percent higher than analysts’ forecast, an “encouraging” sign for the company.
Shell’s earnings were a substantial improvement over the final quarter of 2013 despite the year-on-year downturn. In the last quarter of 2013, the company only earned $2.9 billion. After losses last year, the company’s Americas exploration and production business also returned to profitability, earning $686 million for the company.
Shell is warily monitoring the impact of Western sanctions against Russia, where the company has natural gas operations in partnership with Gazprom, a Russian energy giant. Shell’s chief financial officer, Simon Henry, described the current standoff between the West and Russia as “a difficult situation,” and said, “I don’t think we shall be jumping into new investments in the short term” in Russia.
