Shell Profit Falls 3 Percent on Lower Production, Higher Costs

Royal Dutch Shell Plc, Europe’s biggest oil company, said first-quarter earnings dropped 3 percent as production declined and costs rose.

Profit excluding one-time items and inventory changes fell to $7.3 billion from $7.5 billion a year earlier, The Hague-based Shell said today in a statement. That beat the $5 billion average estimate of 12 analysts surveyed by Bloomberg.

Shell in January forecast first-quarter production would decline 8.5 percent from last year. Chief Executive Officer Ben van Beurden, who took over from Peter Voser at the start of the year, made the company’s first profit warning since 2004 partly on unprofitable operations in the Americas.

U.K. natural gas prices were about 18 percent lower in the first quarter from a year earlier as milder winter weather in Europe eroded demand. At the same time, Shell, which deploys about $80 billion of its capital in North America, has benefited from a gain of about 36 percent in fuel prices on the continent.

Norway’s Statoil ASA beat analyst forecasts yesterday with a 32 percent jump in net income driven by higher U.S. gas prices. London-based BP Plc yesterday said first-quarter adjusted profit fell 24 percent on lower output and refining earnings.

France’s Total SA also reports earnings today. Irving, Texas-based Exxon Mobil Corp. and the U.K.’s BG Group Plc will report tomorrow.

Shell may also have benefited from expanded liquefied natural gas operations following business acquisition from Repsol SA, Bertrand Hodee, an analyst at Raymond James Financials Inc. in Paris, also said before the earnings release.

Net income fell to $4.5 billion from $8.2 billion a year earlier, according to Shell’s statement. The company pumped 3.245 million barrels of oil equivalent a day in the quarter, compared with 3.559 million barrels a year earlier.

Van Beurden plans to dispose of about $15 billion in assets through 2015 and has so far agreed to sell holdings valued at more than $4.5 billion. The company plans to dispose of some shale gas fields in the U.S. to return Americas’ operations to profit.

Of the 33 analysts that cover the company, 14 recommend buying the shares, 18 have hold ratings and one advise selling the stock.

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