Lower Oil Prices Considered Major Cause for Q2 Profit Decline of Shell

Royal Dutch Shell PLC’s shares recently fell following a bigger than expected profit decline in its quarter two earnings, mostly because of lower prices for oil

According to the company, its price-volatility-adjusted revenues were $6.0 billion versus $8.0 billion in quarter two of the past year.

Chief Executive Peter Voser said that their profits have dropped with energy costs.

Net profit declined by 53% from $8.66 billion to $4.06 billion. In the past year, the company’s total asset sales amounted to $1.44 billion. Production increased by 1.9% compared to last year.

However, it was lower versus the past quarter as some huge facilities of Shell were off-line during the quarter for the purpose of maintenance.

Sales of the company declined from the $121.2 billion of last year to $117.1 billion in the present year. The primary cause of the drop was the lower per barrel oil price. The company’s second quarter oil prices are lower by over 40% compared to the same period in 2011. In the production arm of Shell, revenues fell by 23% from $6.06 billion to $4.69 billion.

In Amsterdam, shares of the company fell by 3.7% at €26.875.

Issues and maintenance concerns have pressured the upstream business even as the decline in the per barrel oil

prices has lowered profitability, according to Keith Bowman, an analyst at London’s Hargreaves Landsdown. Bowman further added that Shell is still his favorite choice in the sector.

At the downstream operations of the company, which consist of chemical and refining sales, its performance improved by 20% to $1.3 billion which does not include the effect of asset sales.

By: Chris Termeer