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New Shell chief starts with big profit warning

Last updated: 07:53 17 Jan 2014 EST, First published: 08:53 17 Jan 2014 EST

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Royal Dutch Shell (NYSE:RDS.A) (LON:RDSB) has stunned markets with a warning that fourth quarter profits will be significantly short of its and market expectations.

In an inauspicious start to Ben van Beurden’s stint in charge of the Anglo-Dutch oil and gas giant, he said Shell now expects underlying earnings of about US$2.9bn for the three months to December, some US$2bn shy of forecasts.

Van Beurden, who only took over the job two and half weeks ago, blamed weak industry conditions in refining and marketing products, higher exploration expenses and lower upstream volumes.

He said: "Our 2013 performance was not what I expect from Shell. 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."

Compared with a year ago, Shell said its upstream business faced higher exploration expenses and lower volumes due to a higher level of maintenance activity.

Earnings were also hit by the weakening of the Australian dollar, while the Americas oil and gas business continued to make losses while the security situation in Nigeria remained “challenging”.

Downstream, or refining and marketing, was hit by significantly weaker industry refining conditions in Asia Pacific and Europe. Marketing and trading contributions were also lower.

Chemicals earnings increased as a result of improved industry conditions and operating performance.

Shell’s full-year 2013 earnings before one-offs will be approximately US$19.5bn, reflecting the lower results both in the upstream and downstream units, compared with 2012.

Shares fell 1.4% premarket in New York, to $70.76, after dropping over 2% in London. 

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