Shell earnings fall 13% in second quarter

Shell has posted a 13% drop in second quarter earnings to $5.7bn (£3.6bn) as weaker oil and gas prices hit profits at the Anglo-Dutch energy group. Shell said earnings on a current cost of supply basis, which strip out oil price fluctuations, were $5.7bn in the three months to the end of June, compared with $6.6bn a year ago. Shares in Shell fell, by 2.5% to £22.08, as the earnings number came in short of market expectations of $6bn for the quarter, as the impact of lower prices was exacerbated by maintenance costs and a refinery slowdown in the Gulf of Mexico. Keith Bowman, analyst at stockbroker Hargreaves Lansdown, said: "At a time when investors are looking towards blue chip reliability, the disappointment contained in the headline figures is palpable." Shell's upstream arm, which drills for oil and gas in territories from Qatar to Canada, saw production rise by 4% to 3.1m barrels per day. However, oil and gas prices fell over the period: Brent crude was $108.29 compared with $117.04 for the same period last year; and the Henry Hub gas price has nearly halved to $2.26 per cubic metre. Shell's chief executive, Peter Voser, said he expected a "soft" oil price in the second half of the year. Voser added that more European oil refineries will have to close in the wake of the shutdown of the Coryton site in Essex, the largest independent oil refinery in the UK. A Shell-backed consortium has bought the plant in order to convert it into a fuel import terminal, as the industry's older refineries suffer because they produce petrol instead of higher margin diesel and jet fuel. Voser said more closures were necessary in order to "adjust the refining system". He added: "We are still at over-capacity and some of these refineries will have to get out of the system." The Coryton closure will lead to the loss of around 850 jobs.