Royal Dutch Shell profits decline due to struggling refining division

Royal Dutch Shell reported its profits for the third quarter were $4.5 billion, 32% down from last years $6.5 billion, due to weakness in its refining division, lower oil and gas production and higher costs. Earnings also reflected the impact of the challenging environment in Nigeria. According to the company, this was partly offset by higher contributions from chemicals and increased underlying upstream production volumes, led by Integrated Gas.

Shell said cash flow from operations in the third quarter was $10.4 billion, compared with $9.5 billion a year ago. Net capital investment was $9.4 billion. Production declined to 2.93 million barrels a day, down 2% to last year. Shell noted that the conditions in Nigeria impacted volumes by some 65,000 barrels per day. Company emphasized on the worsening situation in Nigeria and the blockade of its Nigeria LNG venture by the country’s navy had reduced earnings in exploration and production division by $300 million.

The European oil giant said it would reduce net spending next year as it increases the pace of asset sales – news that will comfort investors, who have been complaining that Shell is spending too much.

Shares retreated almost 5% or 104 points on Thursday to 20.79 pound following the release of the results.

Peter Voser, Shell’s chief executive, who is stepping down at the end of the year, confirmed that the company was facing difficulties and said the security situation in Nigeria was continuing to influence companys future outlooks.

In addition he said Shell had started up a series of new oil and gas fields in the past few months, in deep water, in its gas business and in places such as Iraq, which will “drive Shell’s cash flow in 2014 and beyond”.

Mr Voser, said Shell was investing in new ideas and in the next few quarters that would boost performance and would also fill its portfolio with quality projects.