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Shell profits drop on shale write-down and Nigerian woes

Royal Dutch Shell profits dropped 60pc to $2.4bn (£1.6bn) in the second quarter after concluding its shale oil and gas assets in North America were worth $2.1bn less than it had thought.

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8:15AM BST 01 Aug 2013

Excluding the impact of the big one-off writedown, profits still fell 20pc to $4.6bn, a result chief executive Peter Voser admitted was “clearly disappointing” and blamed in part on the deteriorating security situation in Nigeria.

Shell said it would embark on a major programme of asset sales, picking up the pace of divestment from the $21bn it has sold off over the past three years. It launched a strategic review of its North American shale assets, as well as a previously-announced strategic review in Nigeria.

“We are not targeting oil and gas production volumes; rather we are focusing on financial performance,” Mr Voser said on Thursday.

Mr Voser surprised the market in May by announcing his decision to retire and will be replaced next year by Ben van Beurden.

Shell said the $2.1bn write-down “predominantly related to liquids-rich shales properties in North America” and reflected “the latest insights from exploration and appraisal drilling results and production information”.

Other energy giants have booked similar writedowns over the past year as the shale glut in North America affected the profitability of their assets.

Shell’s underlying result was well below the expectations of analysts, who had predicted broadly flat profits.

Mr Voser said: “Higher costs, exploration charges, adverse currency exchange rate effects and challenges in Nigeria have hit our bottom line. These results were undermined by a number of factors – but they were clearly disappointing for Shell.”

The security situation in Nigeria, where Shell is struggling to stem oil theft and spills, has forced the company to shut down various oil production assets, and cost it at least an extra $250m in the quarter.

Exploration costs rose to $1.2bn including $600m for unsuccessful wells.

The impact of currency effects of the Australian dollar on a deferred tax liability led to a $450m hit.

Shell announced a dividend of 45 cents per share, up 5pc on the same quarter last year but unchanged from the first quarter of 2013.

Shares in Shell fell nearly 4pc in early trading in London to £22.29.

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