Shell’s profits take a dive as the price of crude plummets

Royal Dutch Shell today reported a 28% slump in fourth-quarter profits as the oil price collapsed, but still notched up a record haul for the year.

Profits for the final three months of 2008 were $4.8 billion (£3.4 billion), down from $6.7 billion a year earlier, and less than half the $10.9 billion made in the previous quarter.

It was the biggest quarterly fall for a decade but Shell still delivered a 14% rise in annual profits to a UK corporate record of $31.4 billion — $85 million a day or $3.5 million an hour — after oil prices soared in summer. BP is unlikely to match that figure next week.

Crude peaked at $147 a barrel in July but has fallen back to around $40. It was today down $1 to $41.16 in New York and off 50 cents at $44.40 in London.

Oil analyst Ivor Pether of Royal London Asset Management said it was "an exceptional quarter because of the huge change in the oil price". Shell said oil and gas production was essentially flat in the final quarter at 3.415 million barrels a day, highlighting the impact of the falling oil price on profits.

Outgoing chief executive Jeroen van der Veer described the fourth-quarter performance as satisfactory, "given the pressure on demand for oil and gas due to a weaker global economy".

He pledged to maintain investment at near to last year's $32 billion. He also raised the fourth-quarter dividend by 11% to 40 cents and proposed increasing the first-quarter payment of 2009 by 5% to 42 cents. Van der Veer, who will be replaced by finance director Peter Voser in the summer, said: "Our strategy remains to pay competitive and progressive dividends, and to make significant investments in the company for future profitability."

The shares rose 3p to 1709p. Peter Heijen, oil analyst at Theodoor Gilissen, said: "I think the most important thing was that they increased by 5%, which is a sign that management has confidence in the business going forward at the current oil price." Some investors had feared the oil-price collapse and investment commitments might make it hard for Shell to meet its big dividend payments.

The Anglo-Dutch firm is still bruised by its experience in the late 1990s when the oil price fell to a 25-year low and it cut its investment programme. It was a disastrous move that contributed to the reserves scandal of 2004.