Earnings Report: Royal Dutch Shell's (NYSE:RDS.A) Earnings Disappoint as Gas Price Declines

Royal Dutch Shell (NYSE:RDS.A) reported a Q4 net profit of $1.96 billion, swinging from a loss of $2.81 billion in the year-ago period, when the company took a billion dollar writedown on its inventory value after a plunge in the price of oil.

Excluding the year-ago inventory writedown, however, Shell's profit declined 75% to $1.18 billion from $4.79 billion.

Shell produces an almost equal amount of natural gas and oil, so while crude's average selling price rebounded in the quarter, natural gas declined, offsetting any gains the company may have received in crude pricing. Meanwhile, Shell's combined production dropped by 2% to 3.33 million barrels per day (bpd).

"We are facing challenging market conditions," Chief Executive Peter Vosser said on a conference call. Vosser added, "Especially downstream and natural gas, despite the headline increase in oil prices, and the outlook for 2010 remains difficult."

Vosser said moves in October 2009 to cut costs, including cutting 5,000 jobs, or 5% of the company's global work force, generated $2 billion in annual operating cost savings. He added that Shell intends to eliminate an additional 1,000 jobs in FY2010, focusing the firings at its refining operations, which Vosser said will save another $1 billion in costs.

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