AMSTERDAM (AP) — Royal Dutch Shell PLC, Europe's largest oil company, reported a 45 percent fall in net profit for the first quarter after it wrote down the book value of refineries in Asia and Europe.
The company said Wednesday that its net profit fell to $4.51 billion (3.27 billion euros) from $8.18 billion in the same period a year ago. The decline followed a $2.29 billion-charge on the refineries, notably the Bukom refinery in Singapore.
Stripping out various charges and fluctuations in the price of oil, Shell said profits were down 3 percent. Its production arm increased underlying earnings to $5.71 billion from $5.65 billion, while its refining arm saw earnings shrink to $1.58 billion from $1.85 billion.
"The impairments we have announced today ... reflect Shell's updated views on the outlook for refining margins," said Chief Executive Ben van Beurden. "There are substantial pressures on the industry from excess capacity, changing product demand, and new oil supplies from liquids-rich shales."
Van Beurden lowered expectations for the company shortly after taking the CEO job with a profit warning in January, and Wednesday's results were ahead of analysts' predictions and Shell's share price rose 3.6 percent in Amsterdam to 28.69 euros in early trading.
"The update has been well received, as Shell continues to attempt to put some light between future profitability and January's profit warning," said Richard Hunter, Head of Equities at Hargreaves Lansdown Stockbrokers in London.
"Less positively, oversupply in the industry, rising costs on the back of increasingly difficult explorations, Shell's exposure to Russia and generally lower margins all present challenges," he added.
At its exploration and development arm, production fell by 9 percent to 3.25 billion barrels of oil and gas equivalent for an array of reasons: fields in decline, operations shut for maintenance, a cap on gas production in the Netherlands, and the closure of much of Shell's onshore capacity in Nigeria due to security concerns.
Last quarter Shell agreed to sell its Australian refining arm and retail gas stations to Vitol for $2.6 billion, and it is seeking buyers for refineries in Scandinavia.