By Justin Scheck and Rory Gallivan
LONDON--Royal Dutch Shell PLC on Thursday said it would freeze
dividend payments, curb its planned spending over the next three
years by some $15 billion, and scale back its investments in shale
resources world-wide as it struggles to cope with weaker oil
prices.
The news came as Shell became the first of the four giant,
integrated oil companies known as "super majors" to report
fourth-quarter earnings. While its profit rose from a poor year-ago
quarter, they came in below analyst estimates, driving shares down
by almost 5% in morning trading in London.
The giant Anglo-Dutch oil company's quarterly profit on a
current cost-of-supplies basis--a metric similar to the net profit
reported by U.S. oil companies--was $4.2 billion, compared with
$2.2 billion in the same period last year. For the full year, the
current-cost-of-supplies profit was $22.6 billion, up from $19.5
billion in 2013.
Analysts and investors expect the weaker oil price to weigh
heavily on the large oil companies' fourth-quarter figures,
compared with the year-ago quarter. Shell, though, had been
forecast to suffer less of a year-over-year impact in the quarter
than rivals because its 2013 fourth-quarter earnings were dragged
down by issues including high spending and poor refining margins,
which prompted the company to issue its first profit warning in a
decade.
"Our strategy is delivering with good performance on our three
themes of financial performance, capital efficiency and project
delivery," said Chief Executive Ben van Beurden.
"These will remain Shell's priorities in 2015, as we continue to
balance growth and returns," he added.
Shell said capital expenditure in 2015 is expected to be lower
than 2014 levels, with more than $15 billion of potential spending
to be curtailed over the next three years.
However, one area where Shell will be active is Alaska, where
the company plans to start drilling this year, Chief Financial
Officer Simon Henry said at a news conference. The company's arctic
exploration has been bumpy in recent years, facing weather-related
delays and mechanical problems including the grounding of an
in-transit drill ship at the beginning of 2013.
The company said it would pay a fourth-quarter dividend of 47
cents a share, a 4% rise on the same quarter last year but flat
from the third quarter. It said it expected to pay the same
dividend in the first quarter.
Shell said earnings in its exploration-and-production division
were $1.73 billion, down from $2.48 billion, with lower oil prices
offsetting benefits such as increased high-margin liquids
production.
Shell said its production for the quarter was 3.213 million
barrels a day of oil and equivalent natural gas volumes a day, down
1% from a year prior.
Shell's processing, or downstream, business reported a sharp
rise in earnings to $1.55 billion from $558 million, "reflecting
steps taken by the company to improve financial performance and the
industry environment."
Shell's revenue in the quarter was $92.4 billion, down from
$109.2 billion a year ago. Net income fell to $773 million from
$1.78 billion.
Since he took over Shell early last year, Mr. van Beurden has
been trying to cut costs across the sprawling firm, scaling back
big spending, most recently when Shell backed away from a proposed
petrochemicals plant in Qatar earlier this month.
But the oil-industry landscape has shifted since Mr. van Beurden
began as CEO: A year ago, Shell was struggling to control high
costs at a time of relatively high oil prices. Now, development
expenses are dropping as the oil price remains depressed.
"We are taking a prudent approach here and we must be careful
not to overreact to the recent fall in oil prices," Mr. van Beurden
said.
Write to Justin Scheck at justin.scheck@wsj.com and Rory
Gallivan at rory.gallivan@wsj.com
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