Shell: 'More US dry gas woe possible'

Shell has warned of possible further impairments in its US dry gas portfolio after taking a large hit in its upstream segment in the second quarter.

The Anglo-Dutch supermajor may also elect to sell off more dry gas properties in the US, although those in Canada appear to be viewed more favourably by the company.

Shell revealed a large increase in net profit on Thursday despite a drop in revenues, but the upstream segment included a net charge of $902 million.

This included impairments of $1.94 billion, primarily related to its dry gas properties in the US, where there was a reduced capital allocation to these assets. Upstream earnings for the second quarter of 2013 included a net charge of $1.85 billion.

Although Shell clawed back much of the impairments through the $3 billion sale of shares in Australia’s Woodside Petroleum and selling out of the Chevron-led Wheatstone project in Australia.

Shell in January sold its 8% equity interest in the Wheatstone-Iago joint venture and its 6.4% interest in the Wheatstone liquefied natural gas project to Kuwait Foreign Petroleum Exploration Company (Kufpec) for more than $1.1 billion.

On Thursday, Shell said: “In Upstream Americas resources plays (shale oil and gas), we have completed a new bottom-up review of our portfolio and strategy.

“The majority of near-term investments will be directed at North America liquids-rich shales, focused on appraisal in western Canada and the Permian (basin).

“Major divestments of non-core liquids-rich shales positions are now complete.

“In western Canada dry gas, the company has long-term growth potential related to LNG opportunities. Shell’s Lower 48 dry gas positions, where we have established production and further exploration potential, remain under review and could potentially be the subject of further impairments and/or asset sales.”

Shell’s strong profit, and vow to continue cost-cutting and asset sales programmes drove the share price up more than 3% by 9:30am in London on Thursday.

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