ROYAL DUTCH/SHELL U.S. EARNINGS SHARPLY LOWER

  Royal Dutch/Shell Group &lt;RD.AS> earnings
  for 1986 from the U.S. Fell sharply because of difficult market
  conditions, lower crude and gas prices and also due to
  different accounting methods, Shell chairman Peter Holmes said.
      The Shell Oil dollar net income fell 47 pct in the year,
  while the additional effect of currency movements reduced the
  contribution to group net income by 57 pct to 472 mln stg.
      The group earlier reported a drop in net income for the
  year to 2.54 billion stg from 3.03 billion previously, with
  lower crude prices outweighing the effect of increased sales by
  volume.
      Although the figures were lower, they were nonetheless at
  the top end of market forecasts. Shell Transport and Trading
  Plc &lt;SC.L> shares, the U.K. Arm of the group, rose to 11.39 stg
  from a close last night of 11.06 stg. Analysts noted that a
  general collapse in exploration and production volumes was
  partially offset by earnings from chemicals rising to 462 mln
  stg from 205 mln in 1985.
      Also, a windfall tax credit and lower than expected
  currency losses had added about 100 mln stg onto fourth quarter
  results, which was the main reason for the figures exceeding
  forecasts, industry analyst Chris Rowland of Barclays de Zoete
  Wedd noted.
      However, he added there could well be a sharp fall in
  performance in the first quarter of 1987, due to the
  improbability that the group would be able to repeat the high
  refining and marketing margins of first quarter 1986.
      The impact of recovering oil prices would come through
  faster on the downstream side than on the upstream as such a
  high proportion of upstream activity centred on gas, which
  typically reacted to oil price changes with about a half-year
  lag, analysts said.
      Holmes said that in the upstream U.S. Sector the third
  quarter of 1986 had been the worst of all.
      Only two of the oil majors had managed to make a profit in
  the period, with Shell Oil being one of them. The decrease in
  U.S. Earnings had been accentuated by tax rates but the group
  had increased share to become volume market leader, Holmes
  added.
      Continued low crude oil prices would continue to subdue
  U.S. Exploration activity. "Exploration is currently pretty
  flat. We are going to go on, but at 16-18 dlrs there will be no
  massive upturn," he said.
      A renewal of exploration in high cost areas of the North
  Sea and the U.S. Requires prices of around 25 dlrs a barrel.
      Ultimately this would lead to a rise in U.S. Imports. "If
  you are not exploring you are not going to find anything," he
  noted.
      U.S. Oil production had dropped some half mln barrels a day
  (bbd) in 1986 and would continue to fall if the price stayed
  below 20 dlrs a barrel.
      This favored OPEC's attempts to stabilise prices, as the
  lower the price the more likelihood there was of non-OPEC
  marginal production shutting down. "OPEC has done pretty
  extraordinarily well...Everything is moving in (its) direction,"
  he added.
  

