Shell first-quarter earnings down 58% on lower oil price

Royal Dutch Shell followed an oil industry trend of reporting sharply lower first-quarter profit due to lower crude prices, while outperforming analysts' forecasts.

Shell said its current cost of supply (CCS) net income, which strips out unrealised profits or losses related to changes in the value of inventories, fell 58 per cent compared to the same period in 2008, to $3.30 billion (Dh12.1bn). Europe's largest oil firm by market value said production of oil and gas fell 3.6 per cent to average 3.40 million barrels of oil equivalent per day in the quarter, as new field startups failed to match natural field declines.

Brent crude averaged around $44 per barrel in the quarter compared to $97 a year ago, hitting earnings at the core upstream oil and gas production unit.

Most other areas of the Hague-based company's business also suffered, with big profit drops in oil refining and fuel retailing and a swing to loss in petrochemicals.

The sharpest reversal in percentage terms was in Shell's oil sands unit, which squeezes crude from bitumen-drenched soil in Alberta, a high-cost activity hit hard by lower oil prices.

This unit swung to a $42m loss from a profit of $249m in the first quarter of 2008.

However, echoing the performance of rivals such as BP and ConocoPhillips, Shell said profit from trading oil and gas rose. Shell said debt levels rose, as cashflow from operations were not sufficient to cover expenses and dividend payments. Gearing tripled to 6.6 per cent but remains low enough not to prompt fears the company may have to cut its dividend.

Excluding one-off gains of $337m, Shell's CCS result was $2.96bn, beating an average forecast of $2.62bn from a poll of seven analysts.

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