01-30-2014, 10:45 PM
LONDON — Royal Dutch Shell said on Thursday that it would step up its sales of oil and gas fields and other assets and sharply cut capital investment this year in an ambitious plan to reshape the company and improve its financial performance.
The company, in confirming a steep profit fall for the fourth quarter, said that it would be restructuring its North American oil and gas operations, where it has overcommitted to developing shale gas and has had to write off losses. It also said it would restructure its global oil refining unit.
Ben van Beurden, who became chief executive of Royal Dutch Shell at the beginning of the year, also ruled out drilling in offshore waters in Alaska this year.
Mr. van Beurden said a recent court ruling against offshore drilling in Alaska had created substantial obstacles to Shell’s plans there. As a result, he said “I am not prepared to commit further resources for drilling in Alaska in 2014.”
“The landscape the company had expected has changed,” Mr. van Beurden said in a statement. He added that “2014 would be will be a year in which we are changing emphasis, to improve our returns.”
In an accompanying statement, Shell said that its adjusted earnings fell 48 percent for the fourth quarter to $2.9 billion compared with a year earlier. Earnings for 2013 were $19.5 billion, 23 percent below 2012. In an unusual step, Shell had prereleased earnings on Jan. 17 because they were below market expectations.
Shell said its earnings were hurt by write-offs on drilling in French Guiana, continued security problems in Nigeria and continuing financial losses on exploration and production activities in the Americas.
The company’s overall production of oil and gas fell 2 percent for the year to an average of about 3.2 million barrels per day, but the output of oil, which is usually more profitable than gas, dropped by 6 percent.
The company also said that earnings in refining, the business Mr. van Beurden ran before becoming chief executive, fell by about half.
Mr. van Beurden is responding to pressure from investors to improve financial performance. He said that capital spending, which soared to $46 billion in 2013 as costs rose in the industry, would be cut to $37 billion this year.
He also said that Shell would sell $15 billion in assets over the next two years. Mr. van Beurden has tried to ease investors’ concerns by accelerating asset sales. On Wednesday, Shell announced that it would offload a 23 percent stake in a Brazilian project to Qatar Petroleum International for about $1 billion. Earlier in the month, Shell said that it would sell a minority stake in an Australian natural gas project called Wheatstone to a state-controlled Kuwaiti company for $1.1 billion.
Such sales help ease investors’ concerns because they raise capital for projects as well as dividends.
Mr. van Beurden said that Shell was reacting to an operating environment that the company had not anticipated. While global oil prices remained high, he said, prices for both oil and gas in North America were low. He also said that refining margins, the difference between what a company pays for crude oil and what it can sell the processed products for, “are under pressure.”
Mr. van Beurden said that “restructuring and improving profitability” in Shell’s North America exploration and production business and in its global refining business were “a particular focus for the company.”
Shell is taking $687 million in write-downs in North America including reassessments of the value of shale oil properties and a charge for damage to the giant Kulluk drilling rig, which ran aground off Alaska in the winter of 2012-13.
Shell has spent billions of dollars on lease acquisitions and equipment in an effort to drill offshore in Alaska, but the foray has been plagued by accidents and other problems. Late last year, the company suggested that it might be gearing up to drill this year, but the recent court ruling has apparently killed those plans.