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Royal Dutch Shell Plc Profits Hit

Shares in Royal Dutch Shell (LSE: RDSB) (NYSE: RDS-B.US) slipped by more than £1, over 4%, in early trade this morning, following the oil major’s second-quarter and half-time results.

Earnings on a current cost of supplies basis fell 20% to $4.6bn, compared to $5.7bn in the comparative quarter last year. Rising costs also contributed to the lower-than-expected figures, with crude oil, natural gas, oil products and chemicals all susceptible to fluctuating prices, while the company also highlighted increased exploration well write-offs as a contributor to the decline in earnings.

Management pointed towards an identified net charge of $2.2bn for the sharp decline, “predominantly related to liquids-rich shales properties in North America”. Additionally, Shell also took a hit of $700m for oil theft and gas supply disruptions in Nigeria and to cope with the impact of the weakening Australian dollar on a deferred tax liability.

Chief Executive Officer Peter Voser commented:

“We have recently launched strategic portfolio reviews in both Nigeria onshore and North America resources plays, which will lead to further focus and divestments there, as we continue to shape the company for the future. Our strategy is to deliver sustainable growth in cash generation through the business cycle, underpinning Shell’s competitive dividends and returns. We are not targeting oil and gas production volumes; rather we are focusing on financial performance.”

As such , shareholders saw a 5% bump in the Q2 dividend, rising to 45 cents per ordinary share, with Shell yielding a consensus estimate of around 4.9%. Income investors might well view today’s decline in the share price as a buying opportunity, then…

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> Sam does not own shares in any of the companies mentioned.