Royal Dutch Shell’s new boss Ben van Beurden made a gloomy start to his tenure as he issued a shock profit warning just two weeks after taking over at the helm.
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”. The oil giant blamed higher exploration costs and ongoing woes in refining for the poor end to its year.
Shares fell 2% as Shell said a range of factors, including hefty writedowns, were expected to see fourth quarter earnings plunge 70% and full year earnings drop 38%. van Beurden admitted: “Our 2013 performance was not what I expect from Shell.”
Shell expects to reveal writedowns of $700m (£429m) for the fourth quarter and $2.7bn (£1.7bn) for the full year relating to its upstream business when it posts annual results on January 30.
These will contribute to a plunge in fourth quarter earnings to around $2.2bn (£1.3 bn) and 2013 earnings to about $16.8bn (£10.3bn), the group said.
With writedowns stripped out, fourth quarter underlying earnings are now expected to almost halve to around $2.9bn US (£1.8bn), with annual results 23% lower at around $19.5bn (£11.9bn). Analysts had been pencilling in fourth quarter underlying earnings of $4bn (£2.4bn).
The profits alert comes after an already difficult few months for the Anglo-Dutch group, which disappointed the market last year when third quarter underlying profits slumped by a worse-than-expected 32%. This was largely caused by a 49% drop in downstream profits as a result of weaker refining conditions caused by industry overcapacity and poor demand.