LONDON: Shell issued a severe profits warning on Friday blaming exploration costs, pressures across the oil industry and disruption to Nigerian output, sparking a sharp drop in its share price.

The London-listed energy group said in a surprise trading update that fourth-quarter profits were set to be “significantly lower than recent levels of profitability”.

Profit on a current cost of supplies (CCS) basis or current-cost accounting — which strips out changes to the value of oil and gas inventories — was set to plunge 70 percent to about $2.2 billion (1.6bn euros) in the three months to December.

That would mark a fall from $7.3bn in the same period of 2012.

Over the whole of 2013, CCS profit was expected to dive 38 percent to $16.8bn.

The grim figures caused Shell’s share price to fall heavily in early morning deals in London, before later clawing back some ground.

“Shell’s fourth quarter 2013 earnings ... were impacted by weak industry conditions in downstream oil products, higher exploration expenses and lower upstream volumes,” the company said.

Excluding one-off items, CCS profit sank to $2.9bn in the fourth quarter, down from $5.6bn in the same part of 2012.“Our 2013 performance was not what I expect from Shell,” said chief executive Ben van Beurden in the gloomy update, published just two weeks after he took the helm at the Anglo-Dutch major.

“Our focus will be on improving Shell’s financial results, achieving better capital efficiency and on continuing to strengthen our operational performance and project delivery.”

Net profit was set to plunge by 73 percent to $1.8bn in the fourth quarter of 2013, compared with the outcome a year earlier, Shell added.

Annual net profit was expected to slide 38.5 percent to $16.4bn in 2013, from $26.7bn in 2012.

Friday’s dire earnings update was published ahead of Shell’s official annual results statement, which is scheduled for publication on January 30.—AFP