Shell profits slump after oil slide
Royal Dutch Shell has reported a 57% slump in first quarter profits after it was hit by the fall in oil and gas prices.
Earnings excluding one-off items dropped from 7.33 billion US dollars (£4.7 billion) in the same period last year to 3.25 billion US dollars (£2.1billion) though the figure was better than City forecasts.
It comes after the Anglo-Dutch oil giant earlier this year said it was pulling nearly £10bn out of planned investment. The group revealed this month that it was buying oil and exploration group BG for £47bn.
Chief executive Ben van Beurden said: “Our results reflect the strength of our integrated business activities, against a backdrop of lower oil prices.
“Meanwhile, in what is clearly a difficult industry environment, we continue to take steps to further improve competitive performance by redoubling our efforts to drive a sharper focus on the bottom line in Shell.
“Part of this focus is the sale of non-strategic assets. In parallel we continue to reduce our operating costs and capital spending.”
Shell saw underlying profits from its upstream exploration and production arm fall 88% to 675 million US dollars (£437m) “impacted by the significant decline in oil and gas prices”.
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The price of a barrel of Brent crude has fallen by half since last year.
Shell’s fall in upstream earnings was partly cushioned by one-off items including a 600 million US dollar (£389m) credit after UK tax breaks for the North Sea oil industry.
There was also a 1.42 billion US dollar (£920million) gain from disposals as Shell sells off unwanted operations.
Meanwhile there was a sharp improvement in the group’s downstream arm which includes refining and marketing activities as well as oil trading.
Underlying earnings in downstream were up 68% to 2.65 billion US dollars (£1.7bn) in a better quarter for refining.
Shell’s results come two days after rival BP reported a slump in profits due to lower oil and gas prices, but which was also not as bad as expected partly thanks to a better downstream performance.
Shares rose 1%. Keith Bowman, equity analyst at Hargreaves Lansdown stockbrokers, said: “The results are ahead of expectations.
“Like rivals including BP, the fall in the oil price has proved to be something of a double edged sword, with the earnings impacted upstream operations being partly compensated for by the tailwind given to its downstream refining business.”