AP Business Writer
AMSTERDAM (AP) -- Royal Dutch Shell PLC says it will not be entering new investments in Russia anytime soon as tensions rise over the country's confrontation with Ukraine.
Chief Financial Officer Simon Henry said the company, Europe's largest oil company, will continue to oversee its existing operations and will cooperate with any sanctions placed upon Russia by Western powers. Amid the uncertainty, however, it will hold back on starting new projects.
"I don't think we'll be jumping into new investments (in Russia) anytime soon," Henry said on a conference call with reporters Wednesday after the company reported first quarter earnings. Shell has previously also said its early-stage plans for developing shale gas in Ukraine are on hold.
Meanwhile, Henry defended a meeting this month between Shell CEO Ben van Beurden and Russian President Vladimir Putin, saying it should not be interpreted as the company taking sides in the Ukrainian crisis. One of Shell's key operations is a gas production and liquefied natural gas, or LNG, plant on Russia's Sakhalin island. Van Beurden and Putin met at the 20th anniversary of Sakhalin's opening, and re-affirmed existing plans to expand the project's capacity.
Back in 2006, the Russian government forced Shell to cede its leading position in the Sakhalin project to state-controlled company Gazprom.
"We hope for a peaceful and mutually beneficial conclusion to the current events that enables us to continue growing the economic interdependence which we feel is conducive to long term peace and wealth generation for both sides of the fence," Henry said.
In its earnings, Shell reported a 45 percent fall in net profit after it wrote down the book value of refineries in Asia and Europe.
The company said net profit fell to $4.51 billion (3.27 billion euros) from $8.18 billion in the same period a year ago. The decline followed a $2.29 billion-charge on the refineries, notably the Bukom refinery in Singapore.
Stripping out various charges and fluctuations in the price of oil, Shell said profits were down 3 percent. Its production arm increased underlying earnings to $5.71 billion from $5.65 billion, while its refining arm saw earnings shrink to $1.58 billion from $1.85 billion.
"The impairments we have announced today ... reflect Shell's updated views on the outlook for refining margins," Van Beurden said in a statement. "There are substantial pressures on the industry from excess capacity, changing product demand, and new oil supplies from liquids-rich shales."
Van Beurden lowered expectations for the company shortly after taking the CEO job with a profit warning in January, and Wednesday's results were ahead of analysts' predictions and Shell's share price rose 3.6 percent in Amsterdam to 28.69 euros in early trading.
"The update has been well received, as Shell continues to attempt to put some light between future profitability and January's profit warning," said Richard Hunter, Head of Equities at Hargreaves Lansdown Stockbrokers in London.
"Less positively, oversupply in the industry, rising costs on the back of increasingly difficult explorations, Shell's exposure to Russia and generally lower margins all present challenges," he added.
At its exploration and development arm, production fell by 9 percent to 3.25 billion barrels of oil and gas equivalent for an array of reasons: fields in decline, operations shut for maintenance, a cap on gas production in the Netherlands, and the closure of much of Shell's onshore capacity in Nigeria due to security concerns.
Simon said the fall didn't hurt earnings much because most of the lost barrels were among its least profitable.
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