Shell’s new boss has issued a shock profits warning after just two weeks in the job – after it emerged that the oil giant’s earnings have nearly halved in the last few months.
Ben Van Beurden – who succeeded Peter Voser as chief executive on January 1 – said the firm’s fourth-quarter figures were expected to be “significantly lower than recent levels of profitability”.
Energy shares suffered yesterday as analysts warned that if Shell “catches a cold” the rest of the oil sector risks catching “flu”.
Shell’s fourth-quarter underlying earnings are now expected to almost halve to around £1.8 billion.
This is set to leave full-year results 23% lower at £11.9billion, adding more fuel to reports the firm is on the verge of selling more of its North Sea assets.
“Our 2013 performance was not what I expect from Shell,” Mr Van Beurden said.
Shell blamed lower oil and gas prices and “weak industry conditions” in downstream oil, as well as higher exploration expenses and lower upstream volumes.
The entire sector has already been suffering from low refining margins – how much money is made from processing crude oil into petrol and diesel.
Oil analyst Neill Morton at Investec Securities said Shell had never before issued a profit warning ahead of its full-year earnings.
He added: “Shell has broken with its recent custom of disappointing on earnings day – it is now dishing up the bad news ahead of time.”
Rival BP also saw shares come under pressure as the market feared an industry-wide impact.
Neil Shah, analyst at Edison Investment Reserch, said: “The weaker refining conditions Shell faces may just point to an economic recovery that is far more patchy than most expect.
“If Shell catches a cold the rest of the oil sector will always wonder if they will catch flu.”
Shell also said yesterday that it expects hefty writedowns of £429million for the fourth quarter and £1.7billion for the full year relating to its upstream business.
These are expected to hit results even further, sending fourth-quarter earnings 70% lower to around £1.3billion and 2013 earnings 38% down to about £10.3billion.
Mr Van Beurden said: “Our focus will be on improving Shell’s financial results, achieving better capital efficiency and on continuing to strengthen our operational performance and project delivery.”
The group will report full-year results on January 30 – but the warning marks a gloomy start to Mr Van Beurden’s tenure at the group.
The Dutch national had risen through the ranks over three decades before securing the top post, beating off competition from internal and external candidates.
He joined the Shell group of companies in 1983 and has held a number of technical and commercial roles in both the upstream and downstream businesses, including in London.