Royal Dutch Shell PLC issued a profit warning for the fourth quarter on Friday, saying results will be worse than most analysts expected due to a mix of lower production, higher costs, and a worse performance by its refining division.
The company gave a provisional net profit figure of $1.8 billion US for the quarter, down from $6.7 billion in the same period of 2012. Full earning figures are not due until Jan. 30.
Its American production activities operated at a loss in the fourth quarter, the company said Friday.
Profits for all of 2013 are expected to be down significantly on 2012, when it made $27.2 billion.
"Our 2013 performance was not what I expect from Shell," said Ben van Beurden, who became Shell CEO at the beginning of 2014.
"Our focus will be on improving Shell's financial results, achieving better capital efficiency and on continuing to strengthen our operational performance and project delivery."
Underperforms other oil companies
Shares, which have underperformed most other major oil companies in the past year, fell more than three per cent in trading in London and were down 1.7 per cent or $1.29 to $74.12 US in New York.
"Shell has broken with its recent custom of disappointing on earnings day," said Investec analyst Neill Morton in a note. "It is now dishing up the bad news ahead of time."
Van Beurden, a Dutchman, took over the top job from Peter Voser, who is retiring, just two weeks ago. Bullish investors may think that the profit warning so soon after Van Beurden assumed office is a move to clear the decks of bad news or build support for a new round of cost-cutting, Morton said.
In its statement, Shell offered a laundry list of problems at its production arm — which usually accounts for the bulk of its earnings.
The company said it had a "high level of maintenance activity" in the quarter, disproportionately at its most profitable operations, including where it sells gas it has transformed to liquid form.
Frequent shutdowns in Nigeria
The company has also suffered frequent shutdowns in Niger's restive river delta due to attacks or vandalism of its pipelines.
In December it said would cancel a $20 billion project to build a facility in Louisiana to convert cheap natural gas to liquids such as diesel and jet fuel. At the time, Voser described that as tough decision made only because the company had more attractive investment opportunities elsewhere.
He used the same argument in July when he booked a $2.1 billion impairment charge on the value of the company's U.S. shale assets and began disposing shale holdings in Colorado, Texas and Kansas.
Shell's attempts to explore for oil offshore in Alaska in the Arctic circle have also taken years longer than expected to get started. That's not so much due to protests from environmental groups, who vigorously oppose the idea, but because of problems with a safety system Shell was required to have in place before commencing drilling.