29-01-09 Anglo-Dutch energy giant Royal Dutch Shell said it made a net loss of $ 2.81 bn (EUR 2.15 bn) in the final quarter of 2008 as plunging oil prices slashed the value of inventories. The loss compared with net profit of $ 8.47 bn (EUR 6.75 bn) during the fourth quarter of 2007 when crude prices were far higher, Europe's largest oil company said.
"During the fourth quarter 2008 worldwide oil and gas related commodity marker prices declined significantly," Shell said. "As a consequence, net working capital decreased by some $ 15 bn (EUR 11.95 bn) during the fourth quarter 2008, mainly due to the lower valued inventory in oil products" held by the group.

Shell's earnings were battered badly in the three months, with oil prices slumping to near five-year lows below $ 33 a barrel as the global economic slowdown curbed demand for energy. The sharp drop in prices came after oil struck historic highs above $ 147 in July as the markets focused on simmering geopolitical tensions in major crude exporters Iran and Nigeria.
Shell said that fourth quarter earnings were also hit by lower production volumes in the United States and higher exploration costs. The group's overall oil output dipped slightly during the fourth quarter to 3.415 mm bpd and was down 2 % in 2008.

For the year, net profit dropped 16 % to $ 26.28 bn (EUR 20.95 bn) even as revenue jumped 29 % to $ 458 bn (EUR 365 bn). In the fourth quarter alone, however, sales fell by almost a quarter to $ 81 bn (EUR 64.5 bn).
"We delivered satisfactory performance in the fourth quarter of 2008 given the pressure on demand for oil and gas due to a weaker global economy," chief executive Jeroen van der Veer said. "Our strategy remains to pay competitive and progressive dividends, and to make significant investments in the company for future profitability. Industry conditions remain challenging and we are continuing the focus on capital and cost discipline in Shell," he said.

Excluding changes to the value of its oil inventories, Shell said net profit dropped 28 % to $ 4.79 bn (EUR 3.81 bn) in the fourth quarter but was up 14 % to $ 31.37 bn (EUR 25 bn) for 2008.
Shell's results "should be seen as accomplished and reassuring in what was a very volatile quarter," said Peter Hutton, analyst at NCB Stockbrokers. "We expect Shell to give some focus on the continued difficulties from the economic environment but to address their strengths to maintain course.
Shell remains a top pick in the sector "and we reiterate (our advice to) buy (its stock) on these positive results," he added in a research note to clients.