By the OGJ Online Staff
LONDON, Nov. 2 -- The Royal Dutch/Shell Group has reported record earnings for the first 9 months of this year of $10.075 billion, but third quarter adjusted earnings, on a current cost of supplies basis, were $2.686 billion, 17% lower than in the same period last year.
The quarterly figures halt the rise in Shell's profits, which began in early 1999. The main reason is the oil price, which has dropped more than $10/bbl over the last 2 months to a 2-year low of just $20.
Philip Watts, chairman of the committee of managing directors, pointed to the impact of a "weaker overall business environment" with lower oil and gas prices as well as lower refining and chemical margins, but stressed that Shell's operations still demonstrated robust profitability and growth.
"We invested $2.4 billion in the quarter and produced a return on average capital employed of 21% over 12 months, compared with 17% a year ago," he said.
"Total hydrocarbon production was up 5% compared with last year and liquefied natural gas volumes were higher by 15%. At the same time, following the recent agreement with ChevronTexaco Corp., the oil products business is establishing a further major growth platform and is set to become the leading gasoline retailer in the US.
"Additionally we continued to show our expertise in technology and project management. Last month, Shell inaugurated the Malampaya deepwater gas facility in the Philippines. It came in on schedule and on budget. In the summer we commissioned the Brutus deepwater platform in the Gulf of Mexico, this project came in ahead of schedule and under budget."
Watts concluded, "We believe the figures are very encouraging in the light of current trading conditions and the continued uncertainty in the world economy. Delivering industry-leading performance in terms of cash to shareholders reflects the robustness of our portfolio and cost base. I remain confident we will achieve consistently strong results from what is a world class business."
Shell managed to outperform ExxonMobil Corp., which reported a 23% fall in third quarter earnings earlier this month, and Chevron Corp., whose profits dropped 24%. BP PLC is expected to show a profit fall next Tuesday of about 20%, with market estimates ranging between $2.7-3.2 billion.
The oil price falls reduced Shell's earnings from exploration and production by 24% to $1.7 billion during the quarter while oil products added 3% $799 million. Chemicals continued to reflect the impact of weak markets with lower earnings. Oil production fell 3% while gas production increased 24%.