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Shell to report profits down in 2Q, test for new CEO

Los Angeles Times

By Associated Press
1:41 PM PDT, July 29, 2009

AMSTERDAM (AP) — Royal Dutch Shell PLC is scheduled to report second-quarter financial results Thursday. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: Shell’s new chief executive Peter Voser is due for a dramatic debut. A decline in net profit is inevitable for Europe’s largest oil company, as crude prices have been cut in half since the second quarter of 2008.

Analysts think Voser may disclose further details of an organizational restructuring announced in May — including job cuts. The company may also scale back ambitious plans to invest heavily in new production in the face of the ongoing global economic slump.

Shell’s largest European rival, BP PLC, set the tone with a 53 percent fall in net profit Tuesday. Shell may do even worse, given its relatively large exposure to natural gas, which has underperformed oil.

Other issues the company will address are increased pension contributions and operational issues, including a spill in the Gulf of Mexico this week and attacks by rebels on its facilities in Nigeria. Shell is the largest foreign oil company in the African country but its operations there now produce at less than 30 percent of their capacity.

WHAT’S AHEAD: Shell plans $31 billion in capital expenditures this year, more than any oil major, chasing 2-3 percent production growth per year through 2012, and reversing 7 years of declines. Analysts are waiting to see whether Shell scales back those plans.

If it doesn’t, the company will eventually have to halt dividend increases, analysts say.

Shell may also address legislation pending in Nigeria that could force it to renegotiate contracts there.

STOCK PERFORMANCE: Shell shares are about flat from January 2009 at euro18.675, though down 22 percent from a high of euro23.94 last year.

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