Royal Dutch Shell will suspend drilling in offshore Alaska following an adverse US court decision and as the oil major streamlines operations because of a slump in annual profits, the company said on Thursday.
The Anglo-Dutch group said it would halt the project this year after a federal appeals court last week ruled that the US government had improperly relied on inadequate information in the process of awarding licenses for exploration in Alaska.
The recent decision ... raises substantial obstacles to Shell's plans for drilling in offshore Alaska, Shell said in a statement accompanying the earnings release. As a result, Shell has decided to stop its exploration program for Alaska in 2014.
Chief executive Ben van Beurden expressed regret at the situation.
This is a disappointing outcome, but the lack of a clear path forward means that I am not prepared to commit further resources for drilling in Alaska in 2014, he said.
We will look to relevant agencies and the court to resolve their open legal issues as quickly as possible.
Shell revealed the news in a poor results statement that also laid out plans to sell off 15 billion dollars of assets over the next two years. Capital spending will also be reduced to 37 billion in 2014, from 46 billion in 2013.
We are making hard choices in our worldwide portfolio to improve Shell's capital efficiency, van Beurden added.
Two weeks after a profits warning, Shell confirmed that net profits dived 39% to 16.371 billion in 2013, compared with 26.712 billion a year earlier.
Shell shocked investors earlier this month with its first profit warning for a decade, blaming high exploration costs, pressures across the oil industry and disruption to Nigerian output.
Our momentum slowed in 2013. We must improve our financial results, achieve better capital efficiency and continue to strengthen our operational performance and project delivery, said van Beurden.
Our overall strategy remains robust, but 2014 will be a year where we are changing emphasis, to improve our returns and cash flow performance.
Shell's 2013 performance was hit also by higher depreciation, lower upstream volumes and weak industry conditions in downstream oil products.
This month's surprise profits warning and dire results mark a disappointing start to van Beurden's tenure as chief executive. The Dutch national took over from Peter Voser on January 1.
The decision to halt Arctic drilling plans was hailed by environmental groups, Oceana and Greenpeace.