Shell’s Americas Output Profit to Stay Low, Bernstein Says

Royal Dutch Shell Plc (RDSA)’s oil and gas production in the Americas will remain a “low return business” at least through 2015 because of weak prices, according to Sanford C. Bernstein & Co.

Europe’s largest oil company employed about $56 billion of capital, or about 25 percent of the total, in the region last year, Oswald Clint, a London-based analyst at Bernstein, wrote in a report today. The business earned only 1 percent on average last year, less than the 24 percent from Shell’s global production.

Shell, which last year produced more gas than oil for the first time, in January said lower North American crude and gas prices curbed earnings. Its Americas production business returned on average 22 percent from 2005 to 2008, according to Bernstein. Higher costs have also cut the company’s earnings.

“Yet even under our most optimistic scenario, Shell’s Upstream Americas is likely to remain a low return business,” Clint wrote. The business’s return on average capital employed would rise to 8 percent by 2015 and “will lag” the rest of the exploration and production operations, he said.

To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net