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Shell Earnings Fall 4%

Rita and Katrina lower fourth-quarter production.
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Energy titan

Royal Dutch Shell


reported lower fourth-quarter earnings Thursday, as the Gulf Coast hurricanes ate into its bottom line.

Shell earned $4.37 billion in the period, down 4% from a year ago, while sales fell 2% to $92.8 billion. Part of the year-over-year decline was attributable to one-time items, which included a net gain of $34 million in the latest quarter compared with a gain of $499 million a year ago. Using the industry standard "current cost of supplies" basis, Shell's fourth-quarter earnings rose 3% to $5.40 billion, or 82 cents a share.

The company's Gulf of Mexico operations were hard hit by Hurricanes Katrina and Rita, with more than half of its 450,000 barrels of daily production knocked out at the end of the third quarter. Shell said it restored production to 340,000 daily barrels during the period, although a total of 16 million barrels of production ended up being deferred.

Overall, Shell's fourth-quarter production was 3.5 million barrels of oil per day, reflecting the storms. "Excluding the hurricane loss of production of some 129,000 barrels of oil per day compared to the same quarter last year, the end of a production-sharing contract in the Middle East of some 100,000 barrels a day, the impact of divestments and lower entitlements due to higher hydrocarbon prices, production was 1% lower than a year ago," the company said.

It predicted improvement in the coming year.

"Including the impact on production from the hurricanes in the Gulf of Mexico in 2005, the production outlook for 2006 is unchanged from earlier guidance and in the lower half of the range of 3.5 to 3.8 million barrels of oil equivalent per day. Due to the hurricanes in the Gulf of Mexico in 2005, 7-8 million barrels (Shell share) are expected to be deferred in the first quarter 2006. The Mars platform is expected to start production by the middle of 2006 with full production restored in the second half of 2006."