Shell, BG Group, Total Results Reflect Weak Refining Margins

(RTTNews) - European oil giants Royal Dutch Shell Plc (RDS-B, RDSB.L, RDSA.L, RDS-A), BG Group Plc. (BG.L, BRGYY.PK) and Total SA (TTA.L, TTFNF.PK, TOT) Thursday reported lower profit for the third quarter, amid decreased refining margins and lower production. Security situation in Nigeria further added to the woes of Royal Dutch Shell.

Shell said its third-quarter pretax profit decreased to $8.96 billion from $12.68 billion last year. Income attributable to shareholders declined to $4.68 billion or $0.75 per share from last year's $7.16 billion or $1.14 per share. The prior-year results have been restated.

Earnings on a current cost of supplies or CCS basis dropped to $4.2 billion from $6.2 billion in the same quarter a year ago.

CCS earnings excluding identified items were $4.5 billion, while it totaled $6.6 billion last year, as it was hit by significantly weaker industry refining conditions, increased Upstream operating expenses and exploration expenses, in addition to production volume impacts from maintenance and asset replacement activities.

Earnings also reflected the impact of the challenging operating environment in Nigeria and lower dividends from an LNG venture.

Revenue rose to $116.51 billion from $112.12 billion a year ago.

Upstream earnings fell 29 percent and total production available for sale slid 2 percent to 2.93 million barrels of oil equivalent per day, amid deteriorated security situation onshore Nigeria and a blockade of Nigeria LNG.

Downstream CCS earnings declined 43 percent, amid weaker refining industry conditions in all regions due to structural global overcapacity and weak demand.

CEO Peter Voser said, ''We are facing headwinds from weak industry refining margins, and the security situation in Nigeria, which continue to erode the near term outlook. ''

The Board of Royal Dutch Shell announced a third-quarter 2013 dividend of $0.45 per ordinary share and $0.90 per American Depositary Share, up 5 percent from last year.

RDSA.L is declining 4.6 percent at 2,083.50 pence.

Meanwhile, BG Group said its third-quarter profit attributable to shareholders decreased to $1.219 billion from last year's $1.285 billion. The prior-year results have been restated.

On a business performance basis, profit attributable to shareholders was $1.070 billion, while it totaled $1.109 billion last year.

Total Group revenue and other operating income for the quarter fell to $4.445 billion from $4.670 billion in the year ago quarter.

Business performance revenue and other operating income decreased 6 percent to $4.397 billion, reflecting a 10 percent decrease in E&P production volumes to 53.4 mmboe and fewer LNG cargo deliveries, partly offset by favourable changes in the product mix.

Revenue and other operating income decreased 6 percent in the Upstream business, reflecting lower output, partially offset by an increased proportion of oil in the portfolio. Around half of the volume decline came from the decision to reduce activity in the U.S. Other major effects were reservoir decline in Egypt and the impact of planned shutdowns.

The Group's average realised oil price increased 4 percent to $111.72 per barrel and the liquids price increased 1 percent to $96.42 per barrel.

LNG Shipping & Marketing total operating profit decreased 12 percent to $602 million, as the impact of fewer cargo deliveries and reduced margins was partly offset by lower hedging losses.

BG Group's Chief Executive Chris Finlayson said, "Earnings in the quarter were down 4% to $1.1 billion, largely as a result of lower volumes in both the Upstream and LNG segments. The primary driver for the decline in Upstream volumes is the US, where BG Group has reduced its rig count in line with its strategy of pursuing value over volume."

Finlayson said production is expected to recover in the fourth quarter with the completion of the North Sea maintenance shutdowns and new projects coming onstream, most notably Jasmine.

BG.L is up close to 2 percent at 1,269 pence.

French peer Total said net income group share for the third quarter declined to 2.761 billion euros from 3.082 billion euros in the previous year.

Adjusted net income was 2.716 billion euros or 1.19 euros per share, while it totaled 3.364 billion euros or 1.48 euros per share last year.

Adjusted net income excludes the inventory effect, the effect of changes in fair value and special items. Asset sales totaled 1.849 billion euros, comprising mainly the sale of TIGF in France and the group's exploration and production assets in Trinidad & Tobago.

Adjusted net operating income from business segments fell 19 percent to 2.989 billion euros with a 20 percent decline in the Upstream business due to unfavorable production mix and higher exploration charges and a 42 percent drop in Refining & Chemicals amid decreased refining margins in Europe. Marketing & Services saw a 35 percent increase.

Sales dropped 6 percent to 46.686 billion euros from 49.890 billion euros in the prior year.

Total said it would pay a third-quarter interim dividend of 0.59 euros per share on March 27, 2014.

The stock is down 1.6 percent in Paris at 44.52 euros.