Shell to cut 2,000 jobs

Shell's floating oil production platform

LONDON, England (CNN) -- Royal Dutch/Shell, the world's third-largest oil company, said it would cut 2,000 jobs as it posted a sharp drop in profit as the price of oil and gas tumbled and refining returns weakened.

Second-quarter profit, excluding one-time costs, fell 38 percent to $2.20 billion from $3.53 billion in same three months period to June 30 last year. Analysts polled by Reuters had expected profit based on the current cost of oil supplies of $2.1-2.7 billion, with a consensus of $2.45 billion.

Shares in Shell Transport & Trading (SHEL), which represents 40 percent of Royal/Dutch Shell, fell 3.8 percent to 419.5 pence in mid-morning London trading on Thursday, while Royal Dutch slid 2.3 percent to 45.51 in Amsterdam.

The company's results were an improvement on the first-quarter when profit almost halved as crude prices traded at about $21.15 on average. "The outlook for crude prices remains dependent on the pace of U.S. economic recovery and on developments in the Middle East," the company said.

BP (BP), Shell's biggest rival and Europe's biggest company by market value, said earlier this week profit fell 36 percent. It also cited weak oil and gas prices and poor refining conditions. The world's biggest oil company Exxon Mobil (XOM) is due to report results later on Thursday.

But Chairman Phil Watts told Reuters refining conditions were the "worst in living memory."

"Our second-quarter earnings are below aspirations,'' he said in a statement. "We can do better. We are making progress on our underling productivity targets, but we have more to do on costs and capital efficiency.''

Shell's net income fell 39 percent to $2.21 billion in the second quarter from $3.61 billion a year ago. Its oil refining and marketing division saw profits slump 66 percent to $347 million, down from a record $1.035 billion a year ago.

Profit from pumping oil and gas dropped 17 percent to $1.81 billion, as the price of Brent fell to an average of $25.05 a barrel compared to $27.40 a year ago.

"They are disappointing but not disastrous,'' analyst Steve Turner of Commerzbank told Reuters.

But Peter Hitchens of Cheuvreux said the "problem with Shell is they can't seem to produce two good quarters in a row.''