Tens of millions were wiped off the value of oil major Shell after its new chief executive was forced to deliver a shock profits warning.
The move, one of the first public pronouncements by Ben van Beurden since he took over the top job from Peter Voser on January 1, led to a slide in Shell shares and also unsettled other industry stocks.
Revealing poor trading figures, the firm’s former downstream director said the company had not met expectations, with profits in the fourth quarter taking a particular hammering.
The firm said underlying earnings in the period are expected to almost halve to around £1.8 billion, while full-year results which will be confirmed on January 30 are likely to come in at around £11.9bn, a 23% drop-off from a year earlier.
Shell blamed the slump on a combination of lower prices and weak industry conditions in downstream oil, as well as higher exploration expenses and lower upstream volumes.
The group also revealed expected writedowns of £429 million for the fourth quarter, an anticipated total of £1.7bn for the full year, relating to its upstream business.
The writedowns are expected to drag on profits even further, sending fourth-quarter earnings 70% lower to around £1.3bn and 2013 earnings 38% down to about £10.3bn.
The latest problems come on the back of a 49% drop off in downstream profits in the third quarter as a result of weaker refining conditions caused by industry overcapacity and an overall drop in demand.
Mr van Beurden, who has spent more than 30 years with Shell in various senior roles, admitted the Anglo-Dutch group’s results were below par and said his tenure at the helm would see a major focus on ongoing operational performance.
“Our 2013 performance was not what I expect from Shell,” the new CEO said.
“Our focus will be on improving Shell’s financial results, achieving better capital efficiency and on continuing to strengthen our operational performance.”
Shares in the group fell 4% in early trading yesterday as the gloomy update unsettled investors.
Rival BP’s shares also came under pressure following Shell’s announcement as the market expressed its fears over a similar impact across the wider oil and gas industry, which has already been hit by low refining margins from processing crude oil into petrol and diesel.
Oil analyst Neill Morton at Investec Securities said yesterday’s move by Shell was the first time in the company’s history that it had issued a profit warning ahead of its full-year earnings.
“Shell has broken with its recent custom of disappointing on earnings day it is now dishing up the bad news ahead of time,” Mr Morton said.
Neil Shah, analyst at Edison Investment Research, said: “The weaker refining conditions Shell faces may just point to an economic recovery that is far more patchy than most expect.
“If Shell catches a cold the rest of the oil sector will always wonder if they will catch flu.”
Shares in the company closed down 26.5p at 2,279.5p on Friday.