LONDON -- Royal Dutch Shell PLC on Thursday posted a 67% fall in net profit for the second quarter, as falling production exacerbated the effect of lower oil and gas prices.
"Energy demand is weak," said Chief Executive Peter Voser said. "There is excess capacity in the market and industry costs remain high." He added that the company is "not banking on a quick recovery" in the global economy.
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"Shell is adapting to this new situation, and we must do more," Mr. Voser said. "We are sharpening our focus on delivery and affordability."
The Anglo-Dutch energy company's restructuring program has already eliminated 20% of senior management positions and substantial further cuts are likely, the company said. Cash costs in the first half were cut by $700 million, which would be closer to $2 billion if foreign exchange effects are taken into account, a company spokesman said.
Net profit in the three months ended June 30 fell to $3.82 billion from $11.56 billion a year earlier. Revenue declined 51% to $63.88 billion from $131.42 billion.
Total oil and gas production fell 5.3% to 2.96 million barrels of oil equivalent per day due to lower natural-gas demand in many industrialized economies and continuing violent disruption to operations in Nigeria. Analysts were expecting a production decline of 4.2%.
"Production volumes were even lower than we had forecast," NCB analyst Peter Hutton said. "Crude production was down a whopping 8% and gas down 2% year-on year. This is lowest for well over 12 years."
Rival BP PLC's production rose 4.6% in the second quarter.
The energy company's clean current cost of supplies, a closely watched after-tax figure that strips out gains or losses from inventories and other exceptional items, fell 63% to $3.15 billion from $8.58 billion.
Analysts consider the adjusted figure a better performance measure because it excludes the often-volatile value of oil inventories.
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