Shell reports first quarterly loss in a decade

Royal Dutch Shell PLC suffered a net loss of $2.81 billion in the final quarter of 2008 as plummeting oil prices greatly reduced the value of inventories. This is the first time in a decade that it has made a quarterly loss.

Jan. 30, 2009

2 min read

Uchenna Izundu
International Editor

LONDON, Jan. 29 -- Royal Dutch Shell PLC suffered a net loss of $2.81 billion in the final quarter of 2008 as plummeting oil prices greatly reduced the value of inventories.

This is the first time in a decade that it has made a quarterly loss. The figure contrasts with the same period a year ago when it posted earnings of $8.5 billion when crude oil prices were much higher. Lower production in the US and higher exploration costs also affected fourth quarter earnings this year.

However, the results for 2008 overall showed an increase in profits of 14% to a record $31 billion.

"During the fourth-quarter 2008, worldwide oil and gas-related commodity marker prices declined significantly," Shell said. "As a consequence, net working capital decreased by some $15 billion during the fourth-quarter 2008, mainly due to the lower valued inventory in oil products."

Oil prices have fallen by over 60% from a historic high of $147/bbl last July to below $40/bbl as the global economic crisis has impacted oil demand.

Shell's oil production in the fourth quarter was 3.4 million b/d and dipped by 2% in 2008.

Jeroen van der Veer, chief executive of Shell, described the company's performance as "satisfactory" for the last quarter. "Our strategy remains to pay competitive and progressive dividends, and to make significant investments in the company for future profitability. Industry conditions remain challenging, and we are continuing the focus on capital and cost discipline in Shell."

Van der Veer will be succeeded by Peter Voser, currently Shell's finance officer, in July. He said during a conference call that the company's refining business is expected to have a "difficult" first quarter. Some refineries are operating at reduced rates, he added, without identifying them.

Van der Veer told reporters he expects industry costs to fall, but cautioned that this could take 12-18 months. He said rig rates and steel costs have dropped.

Shell did not announce job losses, but revealed that its capital investment of $31-32 billion would be slightly less this year than last, as it balances its "commitments to projects under construction and growth with the more challenging economic landscape in 2009."

There had been media reports that the company would reduce its 2009 exploration and production budget and make redundancies.

Contact Uchenna Izundu at [email protected].