Shell plans spending cuts and asset sales after profit fall Royal Dutch Shell said its profits for the third quarter were $4.5bn, nearly a third down on a year ago, due to weakness in its refining division, lower oil and gas production and higher costs. The Anglo-Dutch major said it would reduce net spending next year as it increases the pace of asset sales - news that will cheer investors, who have been complaining that Shell is spending too much. Shell, Europe's largest oil company by market value, said the results were impacted by "significantly weaker" conditions in the refining industry, increased operating and exploration expenses and lower output. It also blamed the "challenging operating environment" in Nigeria, where oil theft and sabotage of pipelines continues to be a huge problem for the majors, and lower dividends from one of its liquefied natural gas ventures. It said this was partly offset by higher contributions from its chemicals division. The results show Shell struggling amid a sharp downturn in the oil refining industry, which has been depressed by low profit margins, global overcapacity and weak demand for petrol and diesel in the west. Peter Voser, Shell's chief executive, who is stepping down at the end of the year, acknowledged the company was facing "headwinds" and said the security situation in Nigeria was continuing "to erode the near-term outlook." But he said Shell had started up a series of new oil and gasfields in the past few months, in deep water, in its gas business and in places such as Iraq, which will "drive Shell's cash flow in 2014 and beyond." Mr Voser, who will be replaced on January 1 by Ben van Beurden, the company's former head of downstream, said Shell was "rich with new investment opportunities" and in the next few quarters would have to make "hard choices" between the best potential projects in its portfolio. Shell said cash flow from operations in the third quarter was $10.4bn, compared with $9.5bn a year ago. Net capital investment was $9.4bn. Gearing at the end of the quarter was 11.2 per cent. It said earnings on a current cost of supplies basis, a measure which strips out changes in the value of inventories, was $4.2bn compared with $6.2bn last year. Excluding identified items earnings came to $4.5bn, compared with $6.6bn a year ago - a drop of 32 per cent. Production was 2.93m barrels a day, down 2 per cent year on year. Shell said the deteriorating operating environment in Nigeria impacted volumes by some 65,000 b/d. It said output was also affected by higher maintenance and asset replacement activities. Shell said the worsening situation in Nigeria and the blockade of its Nigeria LNG venture by the country's navy had reduced earnings in its upstream - or exploration and production - division by some $300m. It said its upstream Americas unit continued to be lossmaking.