Falling oil and natural gas prices hit profits at Shell and BG Group

Published: 15:58 EST, 26 July 2012 | Updated: 02:43 EST, 27 July 2012

View
comments

Investors ignored the old adage ‘Never sell Shell’ after the Anglo-Dutch oil super-major disappointed with its quarterly profits.

Lower oil prices and shut-downs in the Gulf of Mexico and Qatar meant Shell’s profits – stripping out the changing value of oil stocks – were 13 per cent below last year at £3.7bn.

The result undershot analysts’ expectations, sending the company’s stock down 57p to 2208p.

Oil and gas production edged up by 2 per cent to 3.1m barrels of oil equivalent, but this was wiped out by one-off costs and energy price fluctuations. Shell took a hit of nearly £125m on dividends from an LNG joint venture with an unnamed national oil company, which was late with payment.

Maintenance shut-downs in the Gulf also proved costly, because oil produced in the region carries an unusually high profit margin.

But the greatest impact came from oil and gas prices.

Brent crude oil is down 11 per cent since this time last year, while the price Shell gets for natural gas in North America collapsed by 52 per cent, due to a sudden boom in US shale gas production.

‘Our industry continues to see significant energy price volatility as a result of economic and political developments,’ said boss Peter Voser. But he said the company was ‘implementing a long-term, consistent strategy against this volatile backdrop’.

Shell, which pays its dividend in dollars, raised the payout by 2 per cent for the quarter to $0.43.

America’s gas glut also hampered BG Group (up 26p to 1246p), which was forced to write down the value of its US shale assets by around £830m. Pre-tax profit fell by 73 per cent to £388m in the second quarter, but BG raised its interim dividend 10 per cent to 7.64p.

US giant Exxon Mobil posted second-quarter earnings of £10bn, but would have suffered a 21 per cent drop to £5.4bn if it had not made £4.8bn on asset sales and tax benefits.