ROYAL DUTCH/SHELL U.S. EARNINGS SHARPLY LOWER
Royal Dutch/Shell Group <RD.AS> earnings
for 1986 from the U.S. Fell sharply because of difficult market
conditions, lower crude and gas prices and also due to
different accounting methods, Shell chairman Peter Holmes said.
    The Shell Oil dollar net income fell 47 pct in the year,
while the additional effect of currency movements reduced the
contribution to group net income by 57 pct to 472 mln stg.
    The group earlier reported a drop in net income for the
year to 2.54 billion stg from 3.03 billion previously, with
lower crude prices outweighing the effect of increased sales by
volume.
    Although the figures were lower, they were nonetheless at
the top end of market forecasts. Shell Transport and Trading
Plc <SC.L> shares, the U.K. Arm of the group, rose to 11.39 stg
from a close last night of 11.06 stg. Analysts noted that a
general collapse in exploration and production volumes was
partially offset by earnings from chemicals rising to 462 mln
stg from 205 mln in 1985.
    Also, a windfall tax credit and lower than expected
currency losses had added about 100 mln stg onto fourth quarter
results, which was the main reason for the figures exceeding
forecasts, industry analyst Chris Rowland of Barclays de Zoete
Wedd noted.
    However, he added there could well be a sharp fall in
performance in the first quarter of 1987, due to the
improbability that the group would be able to repeat the high
refining and marketing margins of first quarter 1986.
    The impact of recovering oil prices would come through
faster on the downstream side than on the upstream as such a
high proportion of upstream activity centred on gas, which
typically reacted to oil price changes with about a half-year
lag, analysts said.
    Holmes said that in the upstream U.S. Sector the third
quarter of 1986 had been the worst of all.
    Only two of the oil majors had managed to make a profit in
the period, with Shell Oil being one of them. The decrease in
U.S. Earnings had been accentuated by tax rates but the group
had increased share to become volume market leader, Holmes
added.
    Continued low crude oil prices would continue to subdue
U.S. Exploration activity. "Exploration is currently pretty
flat. We are going to go on, but at 16-18 dlrs there will be no
massive upturn," he said.
    A renewal of exploration in high cost areas of the North
Sea and the U.S. Requires prices of around 25 dlrs a barrel.
    Ultimately this would lead to a rise in U.S. Imports. "If
you are not exploring you are not going to find anything," he
noted.
    U.S. Oil production had dropped some half mln barrels a day
(bbd) in 1986 and would continue to fall if the price stayed
below 20 dlrs a barrel.
    This favored OPEC's attempts to stabilise prices, as the
lower the price the more likelihood there was of non-OPEC
marginal production shutting down. "OPEC has done pretty
extraordinarily well...Everything is moving in (its) direction,"
he added.
 Reuter
