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Shell profits plunge 70% on falling oil demand

Times Online

July 30, 2009

David Robertson

Royal Dutch Shell, Europe’s largest oil company, said today profits fell by 70 per cent in the second quarter due to lower prices and a collapse in demand.

Shell’s earnings in the three months to the end of June declined from $7.9 billion (£4.8 billion) in the same period last year to $2.3 billion. Its first half performance was 64 per cent lower at $5.6 billion.

In his first results as chief executive, since taking over from Jeroen van der Veer, Shell’s Peter Voser gave a gloomy assessment of the oil market blaming the economic downturn for reduced energy demand. Since reaching a record high of $147 a barrel last year, oil is now trading 57 per cent lower at $63.

Mr Voser also warned that production capacity and costs remained too high in the industry and would remain a threat.

Shell’s performance was worse than BP’s, which reported its second quarter results two days ago.

BP’s profits fell 53 per cent but has launched a programme to cut a further $1 billion of costs on top of the $2 billion it has already achieved.

Shell is also cutting costs and took $700 million out of its operations in the first half.

It has also reduced its senior management numbers by 20 per cent and plans to cut capital expenditure by 10 per cent next year.

Mr Voser said: “Energy demand is weak. There is excess capacity in the market, and industry costs remain high. Conditions are likely to remain challenging for some time, and we are not banking on a quick recovery. Shell is adapting to this new situation, and we must do more.”

Despite the difficult market conditions, Shell said it would be increasing its second quarter dividend by 5 per cent to 42 cents a share. The total interim dividend is also up 5 per cent to 84 cents a share.

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