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2014-07-31 17:45:00

SHELL WRITEDOWN US

SHELL WRITEDOWN US

Royal Dutch Shell has been hit by a further $2bn writedown at its struggling North American businesses, as souring investments in the country's shale revolution continued to weigh on earnings.

The Anglo-Dutch oil major said on Thursday it had booked the impairment charges in the three months to June in its upstream operations, which are primarily focused on US gas assets. However, the financial hit was cushioned by $1.2bn of asset disposals.

Ben van Beurden, who took over as Shell's chief executive in January, has previously said that tackling the poor performance of Shell's North American upstream business is a key priority under his "fix or divest" mantra.

The company has invested $24bn in shale and other unconventional oil and gas plays with little reward.

On Thursday Mr van Beurden said further sales or writedowns could be made across this portfolio as it pushed ahead with multibillion-dollar investments in conventional projects in the Gulf of Mexico.

"We are taking firm action to improve Shell's capital efficiency by selling selected assets and making tougher project decisions," he said, adding that the company had completed $8bn of asset sales so far this year.

Shares of Shell rose 2.5 per cent to £24.43 in early trading on Thursday.

In June Shell said it would raise $5bn from the sale of a 19 per cent stake in Australian energy company Woodside Petroleum – part of a two-year, $15bn divestment plan designed to improve its financial performance.

Shell's earnings as measured on a current cost of supply basis, the industry's preferred measure, rose to $5.3bn compared with $4.5bn in the first quarter, beating analysts' expectations.

The company, which has promised to rein in spending on development projects as part of a campaign to improve returns to shareholders, committed $8.5bn to capital projects during the period while it also raised $7.4bn through divestments.

Production rates held steady at just over 3m barrels of oil equivalent a day during the second quarter, as revenues edged up to $111bn.

Shell, one of the biggest generators of dividends on the FTSE 100 index, announced a quarterly dividend of 47 cents payable from earnings per share for the period of 82 cents.

ft.com

Tags: SHELL, US, SHALE, GAS, OIL,