Submitted by Fox First at Ten on November 1st
By TOBY STERLINGAssociated Press
AMSTERDAM (AP) - Royal Dutch Shell PLC saw its core earnings fall 15 percent in the third quarter on the back of lower oil and gas prices and insisted that its strategy to boost production was on track despite failing to strike oil in Alaska before the onset of winter.
Shell said Thursday its earnings on the industry standard "current cost of supplies" measure, which attempts to strip out the impact of changes in the value of inventory, were $6.13 billion, down from $7.24 billion in the same period a year ago - smack in the middle of the range of analyst expectations.
Net profit was $7.14 billion, up slightly from $6.98 billion in the same period a year ago, reflecting a mix of one-off losses and gains in both periods. Notably, the company was forced to write down the value of some of its shale gas assets in the United States this quarter, as a glut of natural gas in the U.S. has impaired their prospects for future profitability.
Sales fell 8.9 percent to $112 billion even though Shell has been investing heavily in new capacity. Production actually declined fractionally to 2.98 million barrels of oil and equivalents per day from 3.01 million a year ago. Shell said that, ignoring the impact of businesses it has bought and sold - and ignoring the unspecified impact from facilities in Nigeria that have been shut for safety reasons - production would have risen one percent.
Shell's chief executive Peter Voser said the company had "underlying" production growth and had "made progress" in its offshore drilling program in Alaska, though it ceased operations for the winter this week without striking oil.
Shell has invested more than $4 billion to seek oil in the Arctic circle off Alaska's coast, building two drilling ships and 20 supporting ships, and undergoing a lengthy process to obtain U.S. licenses to drill despite opposition from environmental groups.
"We've made progress with our Alaska exploration program, commencing drilling operations in the Beaufort and Chukchi seas," Voser said. "This will be a multi-year exploration program."
On Sept. 17, Shell was forced to give up plans to drill into oil-bearing areas this year, after one of the domes it would use to contain a spill failed a test. It said then it would try to drill as many dry 'top holes' as possible this year to pave the way for next year.
The company said Wednesday it had succeeded in drilling one top hole in each area - down from an earlier goal of six - but which will "go a long way in positioning Shell for another successful drilling program in 2013".
The company only has a narrow window of opportunity to drill in the late summer before approaching sea ice and the Arctic winter forces it to withdraw.
The overall production decline is at odds with Shell's goal of increasing cash flow by up to 50 percent from 2012-2015, mostly by increasing production. Earlier this year Shell's chief financial officer Simon Henry explained the apparent lack of growth in production by saying Shell is systematically replacing older, declining fields with young fields where production can be increased and that will remain in operation for many years to come.
Shell's share price was up 1.0 percent at €26.72 in early trading in Amsterdam.
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