Shell Writes Down $2 Billion in Assets Due to Shale Difficulties

Royal Dutch Shell posted a 60% drop in second-quarter profit, largely because the oil and natural-gas giant wrote down the value of its North American shale assets by more than $2 billion after tax, highlighting the difficulties that energy companies face in finding new oil they can pump at a profit.  Shell cited disappointing drilling results at its North American shale assets, which it said turned out to contain less oil than it had hoped.

Shell also dropped its target to produce four million barrels of oil and gas a day by either 2017 or 2018. The company, which produced about three million barrels of oil equivalent a day in the past quarter, will instead focus on financial targets.  Royal Dutch Shell wrote down the value of its North American shale assets by over $2 billion after tax after disappointing drilling results.

 

Shell said it plans to spend about $40 billion this year, up from an earlier projection of about $33 billion and more than 30% higher than last year.

Tthe large oil companies are having troubles that  in capitalizing on the U.S. shale boom. After a decline in natural-gas prices hit Shell's U.S. operations last year, the company said this past January that it was trying to move to shale resources that were richer in oil, rather than less-profitable gas.

Shell declined to give the location of the assets whose value was written down. In North America, the company's shale acreage is located in Texas, Ohio, Pennsylvania, Wyoming, Kansas, Colorado, California and British Columbia.

Excluding the one-time charges, Shell's profit was $4.6 billion, down 20% from a year earlier. Revenue fell 3.8% to $112.67 billion from $117.07 billion.  (WSJ, 8/1/2013)