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July 31, 2009

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Shell's profit sinks 67% in Q2

ROYAL Dutch Shell Plc said yesterday its net profit fell 67 percent in the second quarter to US$3.82 billion, reflecting a sharp decline in oil prices and worse refining margins.

In the same period a year earlier, Shell had profit of US$11.6 billion. Sales at Europe's largest oil company were US$63.9 billion, down from US$131.4 billion.

"Energy demand is weak," said Chief Executive Peter Voser in a statement. "There is excess capacity in the market and industry costs remain high."

He added the company is "not banking on a quick recovery" in the global economy.

At Shell's exploration and production arm, earnings plunged 77 percent to US$1.33 billion. Production sank 6 percent to 2.9 million barrels of oil and equivalents per day, while prices realized by the company were US$52.62 per barrel, from US$111.92 a year ago.

"The industry outlook remains a challenging one, despite the rally in oil prices" from their winter lows, Voser said. In the first quarter of 2009, the company's average selling price was US$42.16 per barrel.

At Shell's refining arm, earnings tumbled 74 percent to US$1.16 billion, due to lower refinery intake, worse margins and a US$611 million charge to write down asset values.

Voser said plans to combine the company's three production arms into two - United States and the rest of the world - were proceeding as planned.

He said the number of "top managers" at Shell had been cut by 20 percent, leaving 600, and repeated earlier statements that there would be further "substantial" job losses among lower ranks, but didn't specify how many.

When the reorganization was announced in June, Shell employed 102,000.

Voser said the company has cut operating costs by US$700 million in the first half of 2009 from a year earlier.


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