Both stories from CNBC.
http://www.cnbc.com/id/100928297
“Separately, rival Royal Dutch Shell reported a 57 percent drop in second-quarter net profits as it suffered from attacks on its operations in Nigeria and it significantly wrote down the value of its shale oil fields in North America.”
http://www.cnbc.com/id/101344098
"The company said this figure had been impacted by weak industry conditions in downstream oil products, higher exploration expenses and lower upstream volumes. "
…
The question that immediately comes to mind upon reading this what impact will this have on other O&G players in the U.S.?
Hopefully someone cull through the company statements and glean relevant information!
A little bit of a follow up with a statement by Shells Voser.
From Financial Times
http://www.ft.com/cms/s/0/e964a8a6-2c38-11e3-8b20-00144feab7de.html#ixzz2qixJZOo0
But his last months in the job were tarnished by Shell’s setbacks in the US. Like other majors, it entered the American shale sector late in the game and was accused by some investors of overpaying for assets. Its earnings were then hit when a supply boom pushed US gas prices to 10-year lows.
As well as its $2.1bn writedown, mostly related to its US tight oil assets, Shell also said its US exploration and production business was lossmaking and would likely remain so to the end of the year and possibly beyond.
Just last month, Shell said it had put its acreage in the Eagle Ford shale in Texas up for sale, as part of a strategic review of its US shale portfolio.
We expected higher flow rates and therefore more scalability for a company like Shell
Mr Voser said Shell’s Upstream Americas business was in the red because of a “strategic decision to slow down” on shale in the face of low gas prices. “Therefore you are hit with more than $3bn of depreciation whilst you don’t have the revenues against it,” he said.
He also acknowledged that exploration results in the US shales had been disappointing. “We expected higher flow rates and therefore more scalability for a company like Shell,” he said.
Shell’s US unconventional oil and gas operation was an “emerging strategic business which needs attention, needs fixing over the next two, three, four years”. He said an expected increase in the company’s tight oil production in the US “will help us get into a more reasonable profit and cash position in the future”.
So Shell came late into the game and as a result had to pay more as land value appreciated. Couple that with LNG’s price dropping because of production booming meant longer term on recouping initial expenses. Not sure what their production numbers are for shale but apparently they were disappointed.
Will check Exxon’s statements to see if we have similarity.